Just the Facts: Everything You Need to Know About Obama's Budget

President Barack Obama released his 2013 budget proposal yesterday. "This Budget is a step in the right direction," he wrote in the introduction. "And I hope it will help serve as a roadmap for how we can grow the economy, create jobs, and give Americans everywhere the security they deserve."

But that's where the easy reading ends. The rest of the proposal is a mammoth 251 pages of tables, charts, footnotes, appendixes, assumptions, and calculations. Some items are mandatory, others discretionary. Some departments are sub-departments of other departments, making it easy to double count and undercount. Phrases like "discretionary cap adjustment" are used liberally. It's not written with the average American in mind.

After reading about a dozen articles analyzing the budget, I was miffed that none offered a simple table showing how much money the proposal wants to spend, and where. So I did just that, with a little context:

Source: White House, Federal Reserve, author's calculations.

As a percentage of GDP, safety-net programs like Social Security, Medicare, and income security are all above the long-term average -- due mainly to a weak economy and an aging population -- while defense spending is actually below average. All other budget categories are about in line with historic norms, if not below. That's an important point that often goes misunderstood: The majority of government spending that is currently in excess of historic averages is on programs that are very popular with voters, like Social Security. As The New York Times reported this week, about half of Americans live in a household that receives government benefits.

So that's spending. What about taxes? Here's what Obama proposes:

Tax Category

Tax Revenue, 2013

As a percentage of GDP, 2013

Average Percentage of GDP, 1960-2012

Individual income $1.4 trillion 8.3% 8.1%
Corporate income $348 billion 2.1% 2.3%
Payroll (social insurance) $959 billion 5.9% 5.6%
Excise $88 billion 0.5% 1%
Other $147 billion 0.9% 0.9%
Total $2.9 trillion 17.8% 17.9%

Source: White House.

Total taxes are as a percentage of GDP will still be below the historic average in 2013 -- and even that relies on an assumption that various tax proposals like allowing the Bush tax cuts on high-income earners will be allowed to expire. Politically, that's probably not going to happen. And without those reforms, deficits will be much wider. Current tax revenue is far below normal, totaling 15.4% of GDP. If tax revenue were at a historic norm, the budget deficit would be $400 billion lower this year, erasing about one-third of the shortfall.

The budget also has dozens of specific proposals. A few notable ones:

  • Obama proposes replacing the alternative minimum tax with a new tax called the "Buffett rule," named after Warren Buffett. Under the Buffett Rule, no one making more than $1 million a year will pay less than 30% in federal income tax. The rule is designed on the grounds that "no household making over $1 million annually should pay a smaller share of its income in taxes than middle-class families pay," the plan writes. But very few households currently pay over 30% of their income as federal taxes, and those that do are not exactly middle class. According to the Tax Policy Center, about 99% of tax filers have tax rates below 30%.
  • As mentioned, Obama's proposal would let the 2001/2003 tax cuts expire on households making more than $250,000, reverting back to tax rates of the late 1990s. "This would reduce the deficit by $968 billion over 10 years," the proposal says. Dividends would also be taxed as ordinary income for those making over $250,000 a year, and capital gains would be taxed at 20%, both up from a current maximum of 15%.
  • Hedge fund managers and private equity managers would lose the "carried-interest" loophole that lets them count labor income as a capital gain, currently capping their income tax at 15%. Ending this loophole is supported by pretty much everyone except those who benefit from it.
  • The U.S. Patent and Trademark Office would be allowed to keep its fee collections rather than turning over a portion to Congress. It could then use this money to overhaul the patent system, which is badly in need of repair, holding back by its own count "millions" of potential jobs.
  • A massive, $476 billion transportation package would take place over six years -- 80% more than was spent on transportation in the last six years. One of the program's goals is to "provide 80 percent of Americans with convenient access to a passenger rail system, featuring high-speed service, within 25 years." The plan would be paid for using "savings from ending the war in Iraq and winding down operations in Afghanistan."

There's much more in the proposal, but this covers the important stuff. Keep in mind, this is merely a proposal. Most of it will probably never become law. Budget forecasts are the ultimate lesson in taking things with a grain of salt.                                              

What do you think about the budget? How would you fix it if you were in charge? Sound off in the comment section below.

Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics.

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Follow him on Twitter @TMFHousel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (166) | Recommend This Article (105)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 14, 2012, at 2:21 PM, schiff34 wrote:

    Nice article, however there are no"savings"from ending the wars in Iraq and Afghanistan.The wars are not funded through our budget, but through appropriations from congress. ending the wars does not reduce the deficit, it simply stops futher deficit spending. In summary it doesn't matter in the slightest, Harry Reid will never allow a vote on a budget.

  • Report this Comment On February 14, 2012, at 2:45 PM, mrbillCZ wrote:

    My concern is the White House's adamant refusal to balance the budget, with a 1.33 Trillion deficit projected this year alone, which is the 4th time over 1Trillion, if memory serves....

    I have no problem with ppl keeping as much as their money as possible if there are no regulations on the back end for controlling how it is used. The wars, as shiff34 aptly states, are a good example, with waste projected at 40-60% (from most govt estimates). And with Detroit doing "so well" these days, is the bailout money repaid? 133 Billion equates to teacher salaries of 40K/yr for 3,325,000 people.

    We can't tax our way out without some give on the other side of the fence.

  • Report this Comment On February 14, 2012, at 2:48 PM, mrbillCZ wrote:

    Morgan, thanks for compiling this btw...no easy feat given the legalese....

  • Report this Comment On February 14, 2012, at 2:49 PM, TMFHousel wrote:

    mrbill,

    Looking at the two tables, how specifically would you balance the budget this year?

  • Report this Comment On February 14, 2012, at 2:59 PM, slpmn wrote:

    Disapointed to see little to nothing in the way of entitlement reform, but assuming that is to be bargained later in exhange for getting the tax increases through.

    Disapointed to see the transportation boondogle. How about rather than spending the "savings" from ending the wars, we just save it.

    I find it laughable when anyone talks about the middle class spending 30% on federal taxes. What is the "middle class" nowadays, anyway? There's a dream and there's reality, and they are far far apart.

    Finally, thanks for the doing the legwork and showing the figures relative to GDP. Very helpful.

  • Report this Comment On February 14, 2012, at 3:01 PM, mrbillCZ wrote:

    TMFHousel,

    Fair enough, but a complicated answer if tackling the elephants in the room--Social Security, Medicare and Medicaid. That said, if a legit task force with an ROI-oriented philosophy tracked down the waste for Medicare.....?

    But, this is intriguing nonetheless. Hopefully I'll have a better answer shortly.

  • Report this Comment On February 14, 2012, at 3:05 PM, TMFHousel wrote:

    mrbillcz,

    True, the answer is complicated. To show how complicated: You mention preventing Medicare waste. But even if Medicare were completely shut down, there would still be an $800 billion deficit.

  • Report this Comment On February 14, 2012, at 3:06 PM, TMFBiggles wrote:

    @ Morgan and mrbillCZ -

    If you want to toy around with balancing the budget yourself, here's a fun game (if you consider budget-balancing fun):

    http://www.marketplace.org/topics/economy/budget-hero

  • Report this Comment On February 14, 2012, at 3:23 PM, mrbillCZ wrote:

    hmmm...so I guess Charles Grodin/Murray Blum with sub in hand is out of the question? :-)

  • Report this Comment On February 14, 2012, at 3:28 PM, mrbillCZ wrote:

    btw...nice post TMFBiggles...

  • Report this Comment On February 14, 2012, at 4:47 PM, DividendsBoom wrote:

    Good article,

    End the carried interest provision. We agree, after that, at least pretend to try to start to think about maybe possibly someday reforming entitlements.

  • Report this Comment On February 14, 2012, at 5:12 PM, AGCJR wrote:

    "As The New York Times reported this week, about half of Americans live in a household that receives government benefits."

    I am not sure I believe this. Can someone post the link to this article? I cant find it.

  • Report this Comment On February 14, 2012, at 5:13 PM, AGCJR wrote:

    Nevermind, it was in the article.

  • Report this Comment On February 14, 2012, at 5:18 PM, mdtopper wrote:

    This just doesn't make any sense. (The article and facts are great - the position our country is in is not).

    A family that has spent years piling up ever increasing debt loads by over spending its income on "wants" (as well as "needs") faces some tough decisions.

    usually, the family does not have the ability to just create extra income. Possibly a second job or a second worker, but usually the family is stuck with focusing on the expense side to solve the problem.

    Our country MUST do the same. Any so called solution that doesn't make significant cuts in expenditures (regardless of how important or sacrosanct they are thought to be), will FAIL.

    Morgan, you asked, which costs would be cut to help achieve a balance. In this case I believe the right answer is ALL costs should be cut. And 20% feels right to me. That would reduce the current years deficit by about $760B. Not enough, but a start.

    Some will say that that wont solve the problem and might even make some parts of the process worse (if it costs jobs for example). But I think if we don't do SOMETHING our society will crumble. That is not an acceptable answer.

    And we should require that future budgets spend NO MORE than they anticipate generating in fees and taxes.

    This would be stiff medicine, but is absolutely necessary!!!

  • Report this Comment On February 14, 2012, at 5:22 PM, TMFHousel wrote:

    ^ Keep in mind too, a government is not like a household. A household must eventually repay all its debts. A country can remain in debt forever. As long as a budget deficit is lower than nominal GDP growth, it is sustainable indefinitely. (though our current deficits are obviously far, far above nominal growth .. that's the problem).

  • Report this Comment On February 14, 2012, at 5:27 PM, mdtopper wrote:

    It would be interesting and helpful to know how much of each expenditure above is for salary and benefits. I wonder if that info is available?

    The way I look at it, all costs are on the table for cutting, but cutting by reducing employees would not realize a 100% "savings" as those people would end up drawing from another pool of funds (unemployment, welfare, food stamps, disability, social security etc.)

    We need to cut projects like dams and bridges that can last for a while longer, or completely unnecessary stuff like wildlife refuges, beautification deals, new fighter planes (we are not at war right?) and other nice to haves that are not really required.

  • Report this Comment On February 14, 2012, at 5:28 PM, Darwood11 wrote:

    Morgan, thanks for putting this together.

    On reading this and listening to President Obama, I had several insights.

    1) This is reminiscent of Pres. "Jimmy" Carter who, in sweater, sitting before a fireplace, admonished his fellow Americans that "we have to pay the price."

    2) In a few years, I will be living in Greece in America.

    3) On second thought, since I live in Illinois, I'm already there. Things are so gloomy that Governor Quinn was caught with a Powerball ticket. He apparently either has concerns over his pension, or is hoping for an exit!

  • Report this Comment On February 14, 2012, at 5:30 PM, mdtopper wrote:

    I guess I disagree. Growing debt, even if below GDP growth is still growing debt. The only reason I see to leverage our country's assets would be to make an outsized profit (for a country that would be to improve dramatically the lives of all the citizens), not to create every green initiative we can think of just because we think its nice!.

  • Report this Comment On February 14, 2012, at 5:32 PM, TMFHousel wrote:

    ^ World War 2 debt was never paid off. The government just kept deficits below nominal GDP growth for several years, and thus debt/GDP fell.

  • Report this Comment On February 14, 2012, at 5:37 PM, DJDynamicNC wrote:

    Those tables are great. Nice to see it all in perspective.

    Thanks for the budget hero app, TMFBiggles, that was great fun. Would have liked a "bring our troops home from Germany and Japan" option too - I feel we've addressed the fascist threat well enough to warrant closing our bases there.

  • Report this Comment On February 14, 2012, at 5:48 PM, DJDynamicNC wrote:

    "usually, the family does not have the ability to just create extra income. Possibly a second job or a second worker, but usually the family is stuck with focusing on the expense side to solve the problem"

    This is actually inaccurate for a couple reasons.

    First, the government is not a family and does not need to be managed the same way (nor should it be).

    Second, the misperception that individuals have to "cut" their way out of budget problems rather than increasing earnings is one of the most prevalent - and most mistaken - I've ever encountered. I have four to six revenue streams at any given time. If I need additional money, I take up additional revenue streams. It's MUCH more satisfying and MUCH more effective than cutting expenses.

    You simply won't get very far by trying to cut lattes out of your budget or whatever other nonsense people advise.

    The problem is that people are taught that income comes from traditional jobs. That's one source - an important one - but you have probably got dozens of marketable skills that you aren't monetizing.

    Sites like "Get Rich Slowly" and "I Will Teach You To Be Rich" offer some good advice on this topic, but the best thing you can do is simply take stock of what you like doing and have the skills to do and figure out a way to market those. You'd be amazed. And bringing in an extra buck - even if it's just a hundred dollars a month - makes a surprising difference. Psychology is important too!

  • Report this Comment On February 14, 2012, at 6:10 PM, jtr1939 wrote:

    Great article. Thanks

    Under BUDGET CATEGORY

    what is INCOME SECURITY?

  • Report this Comment On February 14, 2012, at 6:14 PM, TMFHousel wrote:

    ^ I'll copy straight from the govt:

    Function 600: Income Security

    Function 600 consists of a range of income security programs that provide cash or near-cash assistance (e.g., housing, nutrition, and energy assistance) to low-income persons, and benefits to certain retirees, persons with disabilities, and the unemployed. Housing assistance programs account for the largest share of discretionary funding in this function. Major federal entitlement programs in this function include unemployment insurance, trade adjustment assistance income support, food stamps, Temporary Assistance to Needy Families, foster care, and Supplemental Security Income. Federal and other retirement and disability programs comprise approximately one third of the funds in this function.

  • Report this Comment On February 14, 2012, at 6:31 PM, pdwhitney wrote:

    An older link than the budget game offered earlier; but, still interesting to see a combination of options and how they might affect the balance of the federal budget: http://www.nytimes.com/interactive/2010/11/13/weekinreview/d...

  • Report this Comment On February 14, 2012, at 6:34 PM, ryanalexanderson wrote:

    NIce summary, thanks.

    Marginally related, there's an <a href="http://www.zerohedge.com/news/gop-finally-discovers-obamas-a... article</a> over at Zero Hedge (yes, I know it's a doomer website) that points out that the GOP is backing down all resistance to debt reduction at the moment. At the current rate of deficit spending, it will perfectly time a debt ceiling increase to a couple months before the election.

    Clever move, if true. The deficit will be a major discussion for the election, I bet.

    (disclosure: I have no partisan preference)

  • Report this Comment On February 14, 2012, at 6:36 PM, ryanalexanderson wrote:
  • Report this Comment On February 14, 2012, at 6:46 PM, NOTvuffett wrote:

    golly gee whiz morgan, you know what has me miffed about the president's budget is the $1.39 trillion deficit for the next year. well that and the unrealistic revenue projections.

  • Report this Comment On February 14, 2012, at 6:53 PM, Hawmps wrote:

    Good writing Morgan.

    The problem with "entitlements" is that they are inefficient and the language of the law gets watered down through the process of writing it so only a fraction the original intent of the law is realized in the final legislation (not to mention the inherent definition of the word entitlement). The only thing Medicare has done is guarantee that $$ gets funneled to the insurance industry and make sure that medical costs outpace inflation by 2 or 3 times at least.

    And, you end up with US Treasury IOUs in the name of a "social security trust fund". The only reason for social security to even be a line item in the budget is because the excess collected above what was paid out over the decades went into the general fund and was spent instead of invested and re-invested and grown for the beneficiaries (ie. you and me). So now it requires additional funding and is top of the list. What I see as the ultimate "fix" for social security (not to be confused with ideal, but more like inevitable) is we will all have to file some sort of affidavit of accumulated net worth at the then payout age and if you are above a certain threshold, congratulations you did well in life, but you don't get any.

    All this entitlement stuff sounds good and feels good when they pass the law but there is little to no consideration of the cost to administer these programs over time and you wind up with pennies on the dollar actually going toward the purpose of the entitlement. Then the elected administration of the time points and says, look at all the jobs we created (as a result of the cost to administer the program further expanding the budget).

    The federal budget needs a shave and a haircut. I see the federal budget as a continual breach of fiduciary duty to the American people. Nobody has the short and curlys anymore to do what needs to be done and operate our government within our means. The answer always seems to be, increase the means rather than reduce the budget. There is a way government works that is counter to common sense; that all government agencies and departments have to spend every dollar in their budget or else they won’t get as much money in next year’s budget, and if you don’t spend it all this year, then surely you don’t need more for your department next year so don’t even ask. They always want more, so they make sure they find a way to spend all of the money this year to get more in the budget next year. Wash, rinse, repeat. Wait... that's a great idea. I'll just pass a law that says I will collect more rent, but I'm not going to fix anything, because my expenses are too high and I need more money from you because I planned poorly and ran up my debt and I'll call it Shared Sacrifice.

  • Report this Comment On February 14, 2012, at 7:42 PM, StPeteRoger wrote:

    Morgan thanks for presenting the budget in an understandable way.

    Lack of attention to our national debt is a major concern that this budget does not address. As a minimum, government programs that have no proven benifit should be reviewed and considered for elimination.

    A review of Senator Tom Coburn's "Back in Black"

    http://www.coburn.senate.gov/public/?p=deficit-reduction

    will result in the elimination of some unproductive and unnecessary spending. While you may not agree with all of his suggestions, his review process is a good way to start this task.

  • Report this Comment On February 14, 2012, at 7:46 PM, katyfcolorado wrote:

    What is "income security"? I have not heard that phrase before in the Federal Budget. Thanks Morgan for doing such a great job putting that chart together. I always appreciate how you put data together in a way that brings a different sensibility to dry old numbers.

  • Report this Comment On February 14, 2012, at 7:50 PM, CaptainWidget wrote:

    Thanks for putting that together. It helps me understand the resolve of a person who thinks that increasing the budget by 100 billion dollars from this years ridiculously inflated budget is "a step in the right direction"

    If this budget is a step in the right direction then he's intentionally trying to walk us off a cliff. What a joke.

  • Report this Comment On February 14, 2012, at 8:03 PM, chamblee5 wrote:

    Placing social security in an "entitlement" category is incorrect since workers and their employers actually pay into a system and their contributions are just dumped in with the general fund. If the funds were separate and invested back into the economy with companies versus given to the govt. for IOUs, chances are very good the fund would be solvent. If not, the problems could have been corrected over the years and there would be no problem now. I believe if workers took the approx. 16% of their salary (worker + employer) and invested in the stock market index, they could fund their own retirement over their work life.

    Additionally, to place the Fed Retirement Fund under Income Security with welfare is unjust. Federal workers like public workers did with Social Security have paid more than 7% per year which was to be matched by the government (their employer) and invested in a retirement fund. Again, the govt. gave themselves credit for making that payment (expense) but the monies were "loaned" out to the general fund and the federal employee retirement fund is sitting with IOUs just like the Social Security Fund. The Thrift Savings Plan has shifted that some but mostly, it is still true.

    When folks retire and receive their payments like social security and federal retirement, the government is just paying back their loans like countries have to do. If someone buys a Treasury bond that comes due, we don't refer to the money they draw as an "entitlement" subject to Congress's or the President's decision to cut if budgets get tight.

    Medicare can also be addressed with same logic. Medicaid is an entitlement, medicare is a loan that comes due from the government. What that money covers should be at least consistent up to a point and no less than Medicaid. Yet we pay Medicare 1.5% and then when eligible, we pay premiums for each part A, B, C, and D. So what does the 1.5% cover versus premiums? And yes, Medicare is the basis for the high increase in costs since its inception.

  • Report this Comment On February 14, 2012, at 8:39 PM, AvianFlu wrote:

    What's this I hear about a 1.3 trillion dollar deficit? According to the non-partisan congressional budget office the official figure, which they released barely noticed on Christmas Eve, was between 4 and 5 trillion dollars, using generally accepted accounting principles (GAAP).

  • Report this Comment On February 14, 2012, at 9:22 PM, bbell46356 wrote:

    Social Security and Medicare are supposed to be self funding through payroll taxes. So why are we cutting payroll taxes?

    During a recent business trip with 3 of my employees, not one knew or noticed that they were paying less.

    Progressive Income taxes are fine for most govt. expenses, but why should one working person pay for another's retirement? There is no justice there, just theft.

  • Report this Comment On February 14, 2012, at 10:05 PM, jtr1939 wrote:

    ^ I'll copy straight from the govt:

    Function 600: Income Security

    Many thanks for your response. Guess this would be under "welfare benefits."

    Got it!

    joni

  • Report this Comment On February 14, 2012, at 10:32 PM, McSwami wrote:

    Taxes aren't the answer. They are just covering up the governments access spending. It seems the American public has done its part to contribute more while government spending has been out of control for so long it's accepted as the norm to the general pubic.

    Honestly, I'm reading this article thinking I don't mind paying more taxes to recover from our current deficit but the government will just absorb the access funds and find other things to spend it on. Lather, rinse repeat.

    The government needs to be held accountable. When someone figures out how to make our leaders accountable for their actions we'll be on our way to a better chance of recovery. The "Checks and Balances" aren't holding up anymore.

  • Report this Comment On February 14, 2012, at 11:22 PM, Estrogen wrote:

    Only way I feel that ensures we balance the budget is to withhold all government paychecks for the top !0% of governmental workers and the members of Congress, Senate, and President, until a balanced budget is passed.

    Of course this would never pass, but people respond to selfish incentives most of the time. Currently, there is no incentive to balance the budget. In fact if you want to get elected or re-elected you don't want to balance the budget as that requires saying NO to some programs, which means one would lose votes.

    System is broken.

  • Report this Comment On February 15, 2012, at 12:04 AM, vselam wrote:

    Number and more numbers. Why would it make sense breaking down how the government spends money? Remember our social security checks are locked away in a lock box.

  • Report this Comment On February 15, 2012, at 1:31 AM, NOTvuffett wrote:

    A damn thick book could be written about ss. I don't want to write that book now, but when ss receipts exceeded payouts why wasn't the excess going into a sovereign wealth fund? Or why wasn't a portion of the funds made available into individually directed accounts? Now the lock box (the ss trust) is only a file cabinet full of iou's. And promisses made to people will probably be a net drain on the general fund from now on.

    bbell46356 wrote "Social Security and Medicare are supposed to be self funding through payroll taxes. So why are we cutting payroll taxes?

    During a recent business trip with 3 of my employees, not one knew or noticed that they were paying less."

    These are both excellent points. Everybody knows that these programs are on a trajectory that will end with tears. To substantially decrease the revenues to the mythical lock box will only hasten the time we have to deal will that crisis.

    If more people realized that the government was sucking away about 15% of their money for all their working lives maybe things would be different. Ask yourself this, if you saved about 1 out of every 6 dollars or so and invested it would you rather have that or the benefits the govt. will give you?

    damn, I am sorry to be so long winded. Hourly wage guys don't even look at the amount the company pays them, they don't even look at the deductions the govt. provides, nor do they have a concept of how they can cost more with hidden fees, etc. All they care about is the net amount.

    bbell46356 observed that most employees didn't notice the change in the payroll tax deduction. For most workers, it is about a 2% reduction. The intent was to give people back more to stimulate the economy (while robbing the future).

  • Report this Comment On February 15, 2012, at 3:15 AM, BBLBBD wrote:

    Is this really a "budget" ? How can it be a budget if it just sets random, arbitrary spending increases without regard to the revenue coming in ?

    Man, I would love to live my life under these budget rules: Income=$100,000. Car. Old car cost me $1000 in service last year, this year we will spend $55,000 on new car. Savings=$54,000; Vacation. Last one cost me $2,000, this year we will go first class, $8,000. Savings=$6,000; Restuarants. Last year went to too many chain restaurants and spent $4,000; this year, we go gourmet $8,000. Saved $4,000.

    Wow, under this budget, we can save enough to buy that second house in Bali. Savings: $350,000.

    Budget=balanced. (by the way, can you loan me a few thousand until this works out ?)

  • Report this Comment On February 15, 2012, at 6:41 AM, Nomadder wrote:

    Balance the budget?

    1. Legalize, regulate, and tax the hell out of all drugs. ...and prostitution while we're at it. Revenue streams created.

    1a. Having reduced the need to maintain the current police force, and spending on the "war on drugs", we can cut some costs there (not much but hey) Spending cut.

    1b. Spending on prisons reduced after all the drugs only convictions are released.

    2. Flat tax, eliminate the IRS. Spending cut, and hopefully tax income slightly increased.

    3. Close all military bases outside the US. Spending cut.

    4. Initiate a new govt. work pay scale for all our "leaders". They will be paid whatever the previous years median income was in the US. This includes senators, governors, the President, etc.

    5. Raise the SS deduction from pay to scale properly so that SS is no longer a drag on the system.

    6. Decrease unemployment checks to the point where they work out to be 5% less than minimum wage. If I remember correctly it bases off your previous job (though I could be wrong).

    7. Find ways to reduce waste in Medicare.

    8. Eliminate "illegal immigrant" status. Instead, create a "pending immigrant" status. Allow any and all who want to work in our country to do so. For those "pending", however, citizenship may be bought. In fact that is to become the primary way in which it will be attained. They number isn't terribly important, but lets say 10,000. The pending cases will, in addition to normal taxes, have an additional amount taken out of their paychecks that will go towards this number. They may, if they choose, elect to pay this off sooner.

    Until they are full citizens, they are not allowed to collect unemployment or wellfare, but if they lose their job, whatever they have paid into the pending fund will be waiting for them once they resume legal, taxable work.

    9. New law: No more sports stadiums can be funded with taxpayers money. Let that money go to other, more deserving destinations.

    I would say to tax corps more, but we'd have to have all countries agreeing to that in order to avoid hurting ourselves, so looks like they get a free pass, as usual.

    I know how unrealistic...well, all of this is.

    Just thinking.

  • Report this Comment On February 15, 2012, at 8:09 AM, ravenesque wrote:
  • Report this Comment On February 15, 2012, at 8:30 AM, HaMb0 wrote:

    Awesome article, Morgan. I always enjoy reading your stuff!

  • Report this Comment On February 15, 2012, at 9:28 AM, QuarkHadron wrote:

    Thanks for the article breaking it down to the 'bottom line.' Very insightful.

    And thank you to the Fool community for the logical, civil, thoughtful comments. Drives me nuts to see the childish drivel on most forums. Most sound like children on a playground arguing about a game of kickball, not discussing their nations future. Fools are wise - thank you.

    But, there is one other 'bottom line' that I don't see covered in this article or anywhere else (in the media). This year's budget proposal versus last year's budget.

    When you look at it, you see that this proposed budget is about the same as last year's. And larger than the year before. (Which is actually larger than any previous budget.)

    If the bottom line doesn't change, then there are no 'cuts.' Realignment and reallocation? Yes. Cut? No. Any implication otherwise is deceptive.

    So, there is no other conclusion possible: Any deficit 'reduction' comes only from higher taxes.

    'Reducing' the 'deficit' simply means the 'debt' keeps growing. Which means more taxes taken off the top to pay the interest on the debt. With few dollars left for the actual operation of the government, that means higher, continuing deficits - sustaining the growth in debt and the associated increasing interest costs. If the solution this year is to increase taxes, why would anyone think it won't be the same solution next year. And the year after. What makes you think that concept is sustainable? Do you really want to get to a point where your 'take home' is about half your earnings? And then also pay 15% tax on all your purchases AND services! (England)

    Anyone who thinks that our national debt doesn't matter is simply being (f)oolish. If you don't understand why people think it doesn't matter and why it really does, see my post over at http://caps.fool.com/Blogs/us-debt-to-gdp-ratio-passes/68225... Then research 'international exchange currency.' (related to, but not the same as 'international reserve currency')

    People ask, 'where would you cut it?' Simple answer, 'everywhere.'

    People tend to assume things are similar elsewhere simply because they have no personal basis of comparison. No direct knowledge on which to base their conclusions. People in many (most) other countries live at a far less standard of living than we do, understanding that many of the things we consider necessities are actual luxuries. We do live extremely well as a nation. We have room to sacrifice and still live well, comparatively. I can say this because I've lived on 3 continents, 12 of those outside North America. You can't compare apples to oranges if you've never seen an orange. I grieve when I see the direction this country is heading because I've seen the destination. I know what the results of what our politicians are doing look like.

    We need to accept the responsibility of giving up some of the comfort and security we have. Life isn't 'fair.' We aren't really entitled to all we have simply because we were lucky enough that we were born in the U.S.A. (It has to be luck - you had absolutely no influence on the process. If you aren't naturalized, you did absolutely nothing to earn the 'right' to be American - you were just lucky. Many would say that it isn't 'fair' you get to be an American and they don't. Think about that....)

    But we are able to influence the environment into which our children are born. If we don't swallow our 'bitter pill' now, we are consciously deciding to force a larger, choking pill down the throats of our children.

    Real cuts are needed. Not just higher taxation. And 'we' need to take the responsibility to make sure our politicians know that and do it.

  • Report this Comment On February 15, 2012, at 9:53 AM, QuarkHadron wrote:

    ... 12 'years' outside North America

    Sorry.

  • Report this Comment On February 15, 2012, at 11:03 AM, Etonian8 wrote:

    We all know the pitfalls of credit. I'm sure many Fools do not use credit and pay their bills in full. Yet governments consistently refuse to balance their budget. Look at what is happening in Greece. It could happen to the US

  • Report this Comment On February 15, 2012, at 11:16 AM, ybnvsfool wrote:

    Morgan, thanks for the numbers.

    This is a typical President Obama budget with no surprises. Using your numbers, Social Security spending increases by a nearly a third (29.73%) over the average, Income Security (Welfare) increases by more than a third (37.5%) over the average, Medicare (Obamacare) more than doubles (106.6%) over the average, Medicaid (more Obamacare) more than doubles (120%) over the average and Justice doubles (100%).

    None of the savings are real. But all of the new taxes are very real.

    This budget is totally irresponsible. This budget gives us more government, more entitlements, more spending, more taxes, encourages more wasteful spending and corruption, and most of all lincreases our debt to ever higher unsustainable levels.

    Pray for our children for their future is very uncertain.

    Sorry for the rant, but this spending has to stop and stop now.

  • Report this Comment On February 15, 2012, at 11:24 AM, BlueinTexas wrote:

    If the Warren Buffet rule is adopted I say it can only happen if Mr Buffett has to go back over the last 30 years and pay the increased taxes on all the cap gains he made over that time period. This is basically an increase in cap gains to 30% for anyone who had a year with over $1million which could happen by selling your bussiness or selling an asset, etc..

    And why does no one discuss dividends being taxed at the corporate level first and also at the personal level? So potentially those dollars could be taxed at 35% on the corporate level and another 30% at the individual level. Am I missing something here?

    I dont know how to balance the budget specifically but its obvious that it will have to happen in the top 5 categories for the most part. I think we need a blanced budget amendment or at least a cap on deficit spending as % of revenues. You could also allow any surpluses to be used to cover shortfalls in budgets. But unlesss our politicans are forced to do this I dont see any of them with the political will power to do what will be painful to many americans and political suicide for others. If they are forced to do it then at least it may reduce the political costs to there careers.

    Im not sure there are any easy answers but its very obvious regardless of increased taxes or increased revenues through growth we have a serious spending problem with regrdless to entiltement/social programs.

  • Report this Comment On February 15, 2012, at 12:05 PM, DJDynamicNC wrote:

    Nomadder - I quite enjoyed your suggestions.I'm not keen on the flat tax idea, but I'd be willing to hear out suggestions for ensuring it doesn't become excessively redistributive upwards. The "pending immigrant" suggestion is great - you should write that to your Congressman. I'd vote for that a dozen times over if I could.

    Maybe pretend to be a mega-corporation so that they actually listen to you. :lol:

  • Report this Comment On February 15, 2012, at 12:06 PM, DJDynamicNC wrote:

    "We all know the pitfalls of credit."

    Funny how all the conventional wisdom about debt and credit is completely ignored by almost every successful business, for whom debt and credit are essential tools for leveraging investment opportunities.

  • Report this Comment On February 15, 2012, at 12:25 PM, QuarkHadron wrote:

    "We all know the pitfalls of credit."

    "Funny how all the conventional wisdom about debt and credit is completely ignored by almost every successful business, for whom debt and credit are essential tools for leveraging investment opportunities."

    But there is a foundational difference between government and business.

    Businesses sell product and services to make money. Businesses ad value. Governments don't 'sell' anything. (There's a snide remark about what politicians sell in there, but I don't want to be crude. Okay, well, I want to, but I won't.)

    Governments don't produce anything, aren't designed for profit, and get revenue only from the production of others. Government/taxes reduce value. (Something bought or produced at a given cost is more expensive after tax.)

  • Report this Comment On February 15, 2012, at 1:05 PM, hbofbyu wrote:

    The Buffet Rule is unrealistic and nice election year chumming.

    No politician has the juevos to go to their constituents and say we have to cut the handouts/programs you have been receiving.

    So the piper will be paid through the hidden tax. Politicians love moderate inflation. By the way, I'm seeing above 8% inflation in my world over the past year. I'd like to know how the government fabricates their numbers.

  • Report this Comment On February 15, 2012, at 3:03 PM, DJDynamicNC wrote:

    "Governments don't produce anything, aren't designed for profit, and get revenue only from the production of others. Government/taxes reduce value. (Something bought or produced at a given cost is more expensive after tax.)"

    If governments ONLY reduced value and did not provide some value of their own, then there would be no sense in having government. While some people do in fact believe that that is the case, society at large - and anybody who has ever been ripped off or mugged - would disagree.

    Governments obviously do add some sort of value, then. Creating a safe business environment where you can trust contracts to be honoured and have recourse if they're not is an incredible value. Building a safety net to ensure that human beings aren't slaughtered by the vagaries of the market is a powerful economic and ethical value add. You may disagree on just how much government is ideal, but I sincerely doubt you'd enjoy living in a nation with no government - not that such a thing would last long.

  • Report this Comment On February 15, 2012, at 3:04 PM, DJDynamicNC wrote:

    @hbofbyo - I'm interested in your 8% inflation rate. Where do you derive those numbers?

    I'm paying less for some things than I paid for them last year as businesses cut prices to retain business. Does that mean the nation is facing deflation? Or would you say that extrapolating my personal experiences to the national map is a flawed measurement?

  • Report this Comment On February 15, 2012, at 3:55 PM, Hawmps wrote:

    I stand corrected... Social Security is not an entitlement... it is a ponzi.

  • Report this Comment On February 15, 2012, at 4:03 PM, TMFHousel wrote:

    Just to note: Entitlements like Social Security are in the "mandatory" spending category, meaning they can't be changed without changing existing law. The current spending amounts have nothing to do with Obama.

    Further, calling Medicare "Obamacare" is a little extreme. Medicare was started in 1965, when Obama was three years old.

  • Report this Comment On February 15, 2012, at 4:13 PM, QuarkHadron wrote:

    DJDynamicNC:

    It is a common fallacy of logic to deduce that because too much of something is bad, none of it must be the obvious conclusion. People do that a lot, but comparing the effects of too much to the consequences of none at all is an illogical argument.

    I was speaking in a business model context. You added the 'ONLY,' which twists the statement so it can be argued in an extreme context. That was your premise, not mine.

    Whether we benefit from government does not change my statements and they remain valid:

    The cost of government does increase the cost of producing and consuming goods and services.

    Government does not operate on a profit model. It does not produce - it consumes. At best, I would concede that it does indeed redistribute wealth, but only after 'consuming' some value to cover the cost of the redistribution function.

    I could counter the examples you cite by pointing out that ensuring contracts are honored has not always been a function of government. Guilds, personal enforcers and the concept of 'might is right' have all been previously employed for long periods of history. They were a 'cost of doing business.' (Yes, our government could also be considered a cost of doing business - but it still 'consumes' value.)

    'Ethical' value cannot be quantified. And it's unquantifiable value is arguable. Again, governments that did not provide an economic 'safety net' did (and do) exist.

    But if you really believe that government and business operate on the same model, that the government is producing more value than it consumes in cost, so be it. I don't have the time or resources to construct the value comparisons to prove you wrong. Which means, without proof, I could be wrong.

  • Report this Comment On February 15, 2012, at 4:26 PM, AvianFlu wrote:

    Welcome to Ameritopia!

  • Report this Comment On February 15, 2012, at 4:31 PM, DJDynamicNC wrote:

    @Quark - that's a fair assessment.

    I would like to note that you said:

    "But there is a foundational difference between government and business."

    When I contradicted you, you said:

    "I was speaking in a business model context."

    Are we discussing government in a business model context, or are we discussing it as though there is a foundational difference between the two?

    For what it's worth, I agree with you that the government is not constructed to deliver profit and has a different role to play. Government has a moral mission - surely you accept that laws against murder, for example, are on the books for ethical reasons as well as economic ones - and it undertakes that mission even when the cost of doing so is increased inefficiency. I would, of course, argue that there is significant value here - as you pointed out above, it's quite fortunate for one to be born in the USA. That good fortune isn't because the USA is magically better; we've created a system that has led to unparalleled prosperity.

    I'll also agree that "might makes right" and guilds and personal enforcers have indeed been alternate forms of government - for that's what they are, government. If you take away the public sector, the private sector will fill those roles one way or another. The difference is that the private sector is accountable to shareholders and customers, not to the nation at large. That's why Blackwater can fill in for the US military and kill people without being subject to national jurisdiction - they are accountable only to their shareholders.

    You're right that ethical value cannot be quantified. But neither can it be ignored.

    But I, too, could be wrong.

  • Report this Comment On February 15, 2012, at 4:57 PM, JGDTexas wrote:

    The folks on this website are investors. Use the skills of good investing practices and ask yourself, Would you invest in a company run like this?

    The proposed budget is a farce. It defies logic and reality.

  • Report this Comment On February 15, 2012, at 5:16 PM, 2logical wrote:

    Thanks to DJDynamicNC and others with solid insights and comments.

    Not sure if it was another TMF article I read recently, but one way to increase revenues is more effective collections on what is already owed, The article I read indicated that an additional $1 trillion + could be collected over the next 10 years if everyone simply paid their taxes fairly and accurately. That's a healthy start in cutting the deficit, no tax raises or budget cuts required!

    Another suggestion- the Patent Office should get at least a temporary boost in funding to clear out the HUGE backlog there that is slowing down the economic pipeline. The money that is backed up in lost productivity and job creation there represents another increase in tax revenues with no raises or cuts.

    On another note, the 20% across the board cuts seems simple on the face of it, but I wouldn't just cut down 20% of my crops to get rid of the weeds. The president needs to sit down with the GAO and the surgeon general and take a big scalpel to all departments, find out specifically where we have redundancy/duplication/excess/waste and start the cutting that way and also look for consolidation of broader programs/departments.

  • Report this Comment On February 15, 2012, at 5:46 PM, DJDynamicNC wrote:

    2Logical - those are some very solid suggestions.

    The article you're think of was indeed a TMF article, by the same author who wrote this one.

    There are some regulations that absolutely can be removed to allow businesses to get to their business without dealing with unnecessary red tape. In New York, strippers need to have a dancing license. Is that really necessary? What risk does it pose to society for an unlicensed stripper to dance? Do we really need to license strippers (and I'll admit I'm curious as to the licensing process). There are plenty of cases where regulations are nothing more than rent seeking by incumbent businesses and we should absolutely be working to reduce that. On the flip side, there are other cases where there is a clear need for improved or enhanced regulation and we should similarly be advocating for that. Regulations are neither automatically good nor automatically bad.

  • Report this Comment On February 16, 2012, at 1:11 AM, JackCaps wrote:

    On a scale of 0 to 10, how is Obama's 2013 budget help fulfill his 2009 pledge to cut the federal deficit in half?

    http://www.usatoday.com/news/washington/story/2012-01-31/oba...

  • Report this Comment On February 16, 2012, at 1:36 AM, BBLBBD wrote:

    Many folks have mentioned Buffet and his self-professed desire to pay more in taxes. (It's easy dude ! Pay yourself a salary and use a 1040a without itemizing your deductions. Let me be your accountant, I'll have your paying so much in federal tax, you will be the happiest guy around).

    Buffet is a hardcore leftist Democrat. He cannot come right out and give his endorsement due to his high profile. So, he does stunts like this to direct attention to his candidate.

    But seriously, Warren. If you want to pay more in taxes, let me have a shot at your returns. I am sure we can find a way to make you happy.

  • Report this Comment On February 16, 2012, at 1:39 AM, BBLBBD wrote:

    Oh, I forgot to mention. I will do Buffet's taxes on a sort of "reverse contingency fee." That is, for every dollar more he pays in taxes, I will take 1/3 as my compensation. Therefore, if he does not pay more, he does not pay me.

  • Report this Comment On February 16, 2012, at 3:00 AM, Nomadder wrote:

    DJDynamicNC:

    Well, I'm not married to the flat tax idea. Just so long as it's a plan simple enough to fit all on one page and eliminate the need for the IRS as we know it.

    Heh, I would write my Congressman but, and you probably guessed this from my atypical laundry list, I've given up on ever feeling truly represented by any politician. Besides, I live in Japan now anyway.

    Feel free to lift my idea though!

    Oh, and one more:

    As well as pay, all public servants' pensions will also be re-scaled to the median US pension initiated in the previous year as well. Seeing as that's gotta be close to 0 now, or will be soon, I imagine that'll save at least enough extra to refund the Mars program...

    Anyway, cheers man.

  • Report this Comment On February 16, 2012, at 9:17 AM, Biergeliebter wrote:

    President Obama says "This budget is a step in the right direction". Proposed income = $2.9 trillion; proposed spending = $3.8 trillion. By my calculation, that leaves us 900 billion in the hole, or put another way, he plans on spending 31% more than they bring in. And that's if they only spend what is in this plan, which never happens.

    I think I have to disagree that this is a step 'in the right direction'. I think a budget where your spending is 31% more than your expected income would get many a CFO, accountant, or business manager fired because it is irresponsible.

  • Report this Comment On February 16, 2012, at 9:49 AM, Biergeliebter wrote:

    Just to note, many of these components have their own 'mandatory spending', (which usually include entitlements). For example, the $26 billion for Agriculture - 72% of that is for 'nutrition assistance', ie WIC, food stamps, etc. So when you think about the federal employees that work for the USDA, their number is probably dwarfed by the number of staff at the state level that are funded by the 'nutrition assistance' programs.

    So while I think some huge cuts could be made at the federal level (I'd cut the the Department of Energy since it was supposed to be a temporary entity, and Dept. of Education would be gone since there isn't a single classroom teacher working there), I think the programs that fund a much larger portion of federally funded state employee positions need some serious cuts. Unfortunately, as TMFHousel pointed out, many of these programs are 'mandatory' and would require a change in the laws that created/govern them.

  • Report this Comment On February 16, 2012, at 10:02 AM, Biergeliebter wrote:

    And since most of us are investors - I have found that when someone tries to argue that social insecurity is not a ponzi (or pyramid) scheme, I simply ask them to tell me another retirement or investment fund that they could pay into for 50 years and still come away with a negative return.

  • Report this Comment On February 16, 2012, at 11:02 AM, DJDynamicNC wrote:

    @JackCaps: From the article you linked to

    "Congress' inability to pass a long-term deficit reduction plan last year and ongoing partisan deadlock over how to overhaul the tax code and reform entitlement programs like Social Security and Medicare currently leaves no realistic option to achieve a balanced budget anytime over the next decade, according to the report."

    The whole article clearly indicates that Congress was the problem, not President Obama.

    Just figured you should know.

  • Report this Comment On February 16, 2012, at 11:42 AM, DJDynamicNC wrote:

    @Biergeliebter: "And since most of us are investors - I have found that when someone tries to argue that social insecurity is not a ponzi (or pyramid) scheme, I simply ask them to tell me another retirement or investment fund that they could pay into for 50 years and still come away with a negative return."

    Any investment with any risk could come out with a negative return after any length of time.

    If I pay into a system with the understanding that my ultimate payout is going to be a specific set of dollars under a specific time frame based on my specific inputs, and then when it comes time to collect I receive those dollars on that timeframe, then that is many different things, but none of those things is "ponzi scheme."

    I think this word "ponzi scheme" doesn't mean what you think it means.

  • Report this Comment On February 16, 2012, at 12:36 PM, slpmn wrote:

    @BBLBBD and others - While it's debatable whether Buffett is, in fact, a "hard core leftist Democrat", what's not debatable is that he's a brilliant investor who is smarter than you, me, and almost certainly every politician in Washington D.C., including Obama and every Republican running against him. The guy has looked around, done some thinking and concluded that the nation would be better off if the super rich paid more in taxes. If we spent more time listening to guys like Buffett and less time watching FOX News or MSNBC, we'd all probably make better decisions and come to more sound conclusions.

    As an aside, the reason the wealthy are going to be asked to pay more in taxes is because income inequality is so great in this country that most of the people literally can't afford to pay more. It's nice to sit at the top of the pyramid, but if you're the only one with money, don't be surprised if you're asked to step up and chip in - because no one else can!

    It would be awesome if we really had a middle class where the median family income was $150,000. In that pipe dream, a flat tax would probably work just fine. I'm as sick as anyone that most people pay little to no income tax, but I see it differently than most. The tragedy is that most people don't make enough to pay taxes. Might sound kind of goofy, but that's reality. If more people made more money in this country, we could all pay less in taxes and still have the government provide the same level of service. Income inequality - it affects you even if you don't realize it.

  • Report this Comment On February 16, 2012, at 12:47 PM, mrbillCZ wrote:

    Income inequality is an issue. But taxing our way out is not the solution. As I said on other posts, police the spending now (legitimately) and you could achieve great things. No one wants to do that.

    The numbers simply don't work. Per comments above, 1) would you invest in this model, and 2) if you did, you should be fired along with the "CEO"

    The examples should start in Washington, but we know we will not see that example in our lifetime.

    If you want real progress, at the LOCAL level, research the grass-roots programs in NYC for out of work white collars and the "cash mobs" that support local mom & pops. This is truly America in action, not some crap from Washington.

  • Report this Comment On February 16, 2012, at 1:01 PM, NEMnyWtch wrote:

    "As The New York Times reported this week, about half of Americans live in a household that receives government benefits."

    Wow. I would love it if you number gurus could post an article focusing on this one topic. I would like to know how this has changed by way of a % over the last 50-60 years or so. If there is a significant increase over time, and I believe there is, then why? Thanks for another great article Mr. Housel!!

  • Report this Comment On February 16, 2012, at 1:19 PM, NEMnyWtch wrote:

    Ooops - guess I should try checking out the article first. All set - Thx!

  • Report this Comment On February 16, 2012, at 3:55 PM, msr48 wrote:

    msr48

    Taxes:

    Eliminate all dedcutions

    All income included

    Rates:

    zero to $39,999 none

    $40,000 to $250,000 10%

    $250,000 to $500,000 20%

    $500,000 to $1,000,000. 25%

    $1,000,000 and up 30%

    Corporate rate:

    US Earnings 18%

    International 10%

    Spending cuts:

    Eliminate:

    IRS

    Deaprtment of Energy

    Department of Education

    All other departments 5% cut

    next three years, 4th year 10%

    Cap spending at 20% of gnp at the

    end of four years

    Social Security, Medicare, Medicaid

    Remains the same for those over 50 years old

    Others, employer rate goes to treasury bills

    Employee portion goes to a private account

    they manage

    Same for Medicare, etc

    As soon as we have surplus

    Pay down debt and secure S/S, Medicare, etc

    50% to S/S,Medicare, Medicaid

    50% to Debt

  • Report this Comment On February 16, 2012, at 4:02 PM, DJDynamicNC wrote:

    @ MrBillCZ: I'm curious as to how cutting spending on government programs that largely benefit the lower income classes will REDUCE income inequality.

    Cutting taxes primarily benefits the rich. Cutting services primarily impacts the poor. These are both upwardly redistributive actions. How will that close the gap?

  • Report this Comment On February 16, 2012, at 5:02 PM, hbofbyu wrote:

    @ DJDynamicNC

    I am seeing inflation in my world because the bulk of my expenses are not IPADs, computers, cell phones, downloadable music and software apps.

    The inflation I have experienced (above 8%) which makes up the bulk of my spending (and the poor and lower middle class) is in the following:

    Food - Often hidden with smaller packaging. It is easily seen in the price of produce, rice, coffee and other staples.

    Rent - The lack of mortgage lending has created a housing shortage where I live. Rents are creeping up every month.

    Gasoline - no explanation needed

    Entertainment - Most movie theaters in my city have raised their prices by $1. The old release theaters at least by .50 Other entertainment has gone up as well. The NBA, the Opera and Symphony tickets are all up. The amusement and water parks have also raised prices a dollar or two. Even RedBox has gone from $1 to $1.50 (a 50% increase).

    Utilities - Some of this may be attributable to local taxes and fees, but even with the warmest winter on record my heating bill rates have gone up.

    I know this is just my world and every localized part of the country could be different but I see it, and I think it will be spreading as the economy heats up.

  • Report this Comment On February 16, 2012, at 5:28 PM, DJDynamicNC wrote:

    @hbofbyo - I certainly hope it spreads to the rest of the country! You should expect short term inflationary spikes to coincide with a recovery. In fact, my biggest concern about this recovery is that the Fed will get spooked by the normal inflationary adjustments and raise rates or tighten the money supply at exactly the worst time.

    Let's get people working again, then cut spending and raise taxes to pay off the deficit. We're on the right path now.

  • Report this Comment On February 16, 2012, at 6:39 PM, hbofbyu wrote:

    When has the federal government ever cut spending when the tax revenue is finally flowing in at record highs? It won't happen during an election year. And every year is an election year.

  • Report this Comment On February 16, 2012, at 8:50 PM, NationalMatch wrote:

    Excellent as usual Morgan. Much appreciated.

  • Report this Comment On February 16, 2012, at 11:14 PM, dogofthefuture wrote:

    Mr Housel,

    Your historic comp is 1960 to 2013. Medicare started in 1965 and Medicaid a few years later. Did you adjust or should those percentages be a little closer together.

  • Report this Comment On February 17, 2012, at 10:55 AM, DJDynamicNC wrote:

    @hbofbyo - The US has paid off or outgrown its deficit several times.

    Do you know what isn't working? Ripping up the social fabric with austerity measures. The US is unlikely to become Greece, but only because we are fighting to ensure things stay stable enough here that people don't burn down the place.

    People first. Institutions second. This is not so very difficult to understand.

  • Report this Comment On February 17, 2012, at 11:11 AM, mrbillCZ wrote:

    @DJDynamicNC,

    Comparing to Greece is extreme at this point I think, although it is a lesson to watch. My point is there is so much waste, that even a basic MONITORING process could save bilions. The wars are a good example...even the GAO estimated as much as 60% waste. With 800 Billion that's a sizeable chunk that can be used elsewhere. Do that first before raising taxes under the guise of controlling deficits.

  • Report this Comment On February 17, 2012, at 11:47 AM, kennycatkiller wrote:

    I commend Mr. Housel for condensing Obama's entire pipe-dream into an understandable chart. Of course, it is just that--a pipe-dream--since the Congress simply will NOT go along with raising the tax rate on high-earners as Obama continues to insist on. Now, if we display the same chart without those tax increases, it becomes obvious that FY2013 will entail expenditures of more than $1 Trillion more than revenues, thus exacerbating our already massive national debt.

    Obama simply can not get it through his thick skull that when you are broke, you simply can not continue to "invest."

  • Report this Comment On February 17, 2012, at 12:34 PM, wg120251 wrote:

    Very nice piece of reporting. The strongest conclusion that one could draw from this data is that we are not that far off of historical norms. Instead of the "house on fire" screaming we usually hear, as with many things financially, taking a reasoned long term view with doing some tweaking and let time put things back in order. I think Obama is on the right track. And observing that the two health related items are most out of whack (Medicare and Medicaid), Obama had the right priorities 3 years ago. On the revenue side, he is only reasonably addressing the tax code changes of the previous administration but hardly going overboard, slightly below the historical norm.

  • Report this Comment On February 17, 2012, at 1:03 PM, Harley117 wrote:

    The federal government is the most inefficient institution that exists. The are thousands of duplication and overlap of functions and programs costing well over $100 billion. Nothing ever gets purged but rather just continues to grow even though it may not provide any value. Once a program, function or regulation is added it is in the base to grow year after year.

    Obama is all about growing the size of governement. Since the Democrats took control of congress in 2006 spending has incresed over 40% and the debt has grown from $8.4 trillion to over $15 trillion.

  • Report this Comment On February 17, 2012, at 1:19 PM, Surfabouy wrote:

    Good info, nice to see something that helps cut through the clutter of platitudes and rhetoric.

    Regarding some desires above to Cut Spending and Raise Taxes, that worked out pretty well for Mr. Hoover. Still waiting for an example of when that worked to the positive in our history.

    Is it not logical to ask our leaders to address Waste and Fraud in government spending, in Entitlement and Government programs, Government Administrative efficiency, and Defense to start? I have no idea of the potential savings, but logic tells me that with dynamic leadership (OK.....that's asking a bit much, call me a dreamer), it would be substantial. Couple that with addressing entitlement realities for starters.

    And we will be nowhere without a major drop in unemployment/underemployment. This administrations' antagonism toward the job creators in our economy hinders this critical component.

  • Report this Comment On February 17, 2012, at 1:33 PM, joemack101 wrote:

    You guy's think we have problems now? Give this master of illusion another 4 years. None of us are "takers". We are all "working producers & givers". Keep your freedom in mind as well as your ability to make a living. One is not possible without the other.

  • Report this Comment On February 17, 2012, at 2:51 PM, DJDynamicNC wrote:

    @JoeMack -"Keep your freedom in mind as well as your ability to make a living. One is not possible without the other. "

    That is an outstanding point.

    Given that we have four people unemployed for every one job opening, then, the jobs crisis is a critical risk to the freedom of millions of Americans and must be addressed immediately and with priority.

    Those living in poverty are not free. This is the very heart of my socialism.

    I'm glad you agree!

  • Report this Comment On February 17, 2012, at 2:52 PM, DJDynamicNC wrote:

    @Harley - "The federal government is the most inefficient institution that exists."

    Never tried dealing with Verizon customer service, have you?

  • Report this Comment On February 17, 2012, at 2:54 PM, DJDynamicNC wrote:

    "And we will be nowhere without a major drop in unemployment/underemployment. This administrations' antagonism toward the job creators in our economy hinders this critical component."

    You're a job creator. I'm a job creator. Anyone who generates demand is a job creator.

    The big corporations who are members of the Chamber of Commerce? Sure, they're job creators too. Largely in India and China.

    This whole "job creators" crap is just a euphamism for "rich people." If this administration has an antagonism towards rich people, it is one shared by the vast majority of Americans who are tired of being pillaged by them.

  • Report this Comment On February 17, 2012, at 3:23 PM, banjojim wrote:

    We will not be saving any money by ending wars that we are not paying for. The wars are financed by borrowing.

  • Report this Comment On February 17, 2012, at 3:43 PM, jbmaine wrote:

    Morgan, your chart uses the so-called Unified Budget. As I recall in my younger days, Lyndon Johnson created that budget process to hide the cost of the Vietnam War from the American people.

    Now I think it makes it impossible to understand the budget, its impact, and how to fix its problems. Also as we know Presidents of both parties used Soc Sec funds as an accounting gimmick to hide the real source of the US deficit. So I'd recommend going back to how it was done pre-Vietnam War. Back to budget honesty. A budget for revenues collected from Soc Sec taxes; then the budget based on Income taxes. Then it becomes clearer what changes in tax policy are needed.

  • Report this Comment On February 17, 2012, at 4:06 PM, ibuildthings wrote:

    Tax revenue will increase if the economy gets better. Much of the economic malaise is from those "with money" not investing when they can't feel secure in what will happen with their investment. Whatever the tax policy is going to be, figure it out, announce it, and guarantee that it won't change for 10 years. Then the money will come out of the woodwork to start new enterprises.

    And this recent "payroll tax" cut? Isn't that social security? I thought that third rail of politics was supposed to be sacred, yet both parties are willing to shorten its horizon for the sake of tax-cut bragging rights.

  • Report this Comment On February 18, 2012, at 1:43 AM, CrankyTexan wrote:

    1. Federal debt has increased by 44% from $10.6 trillion to $15.23 trillion.

    2. Americans living in poverty have increased by 16% from 39.8 million to 46.2 million.

    3. Total unemployment (U6) has increased by 21% from 19 million to 23 million.

    4. Price of gasoline has increased by 80% from $1.86/gal to $3.35/gal

    5. Grocery prices have increased by 17%. [CPI Food price index of 119.6 to 164.3]

    6. Americans on food stamps have increased 42% from 31.8 million to 45.2 million

    7. Healthcare premiums per family have increased by 19% from $12,680 to $15,073.

    8. US Bank failures per year have increased by 268% from 25/yr in 2008 to 96/yr in 2011.

    9. Home foreclosures per year have increased by 34% from 850,000 to 1,140,000

    10. Total bankruptcy filings per year have increased by 31% from 1,117,641 to 1,467.221.

    11. US credit rating was downgraded by S&P for first time

    12. Median Household income has declined by 4% from $50,939 to $48,950.

    13. Median value of existing homes has declined by 17% from $197,233 to $162,500.

    14. US dollar compared to foreign currencies has declined by 7.7%. [US dollar index on Jan 20, 2009 versus Dec 30, 2011]

    15. US dollar compared to gold has declined 89%. [$855/ounce to $1617/ounce]

  • Report this Comment On February 18, 2012, at 2:16 AM, Chris1016 wrote:

    If the deficit isn't addressed soon, we'll be in Greece's position before we know it. How do we start? Eliminate the Education, EPA, Energy and Homeland Security departments; scrap the high speed rail; make all wages subject to social security, including federal and state employees. I haven't put a sharpened pencil to it but I think that would get us half way there, even allowing for the continuation of some portions of the eliminated departments (we still need a version of the AEC for instance).

  • Report this Comment On February 18, 2012, at 6:44 AM, ericfred wrote:

    People don't have to take capital gains. Raise the rate and people will simply stop realizing gains! Instead, announce that rates are going up in 3 years, and watch the gusher in tax receipts rolling in as investors try to get in as many gains as possible before the favorable rates expire. Then in three years, the current crisis may have passed, and it may or may not be necessary to raise the capital gains rate after all. Problem solved!

  • Report this Comment On February 18, 2012, at 10:35 AM, plowhandle wrote:

    Grover Norquist and the Tea Party want to shrink govt to the point that it will fit into a bathtub...supposedly, this will beam us into national nirvana. A country with this size of govt actually exists, so according to Grover's tenets, it must be a wonderful place to live or invest into. That garden of eden is ....Somalia.

    .

  • Report this Comment On February 18, 2012, at 2:04 PM, cosmokramerrules wrote:

    Lots of great ideas here, but honestly what Sens or Reps presently have any incentive to change how they vote on appropriations or on taxation? Everyone knows the problem, but regarding solutions, intransigence has set in on both conservative and progressive sides and neither side respects the other enough to seriously consider the other's proposed solutions. Everyone talks about the need to reform the tax code, for example, but can you imagine Congress coming to any agreement on a common-sense solution that would really work? I hate to say it, but this situation seems absolutely hopeless right now, and I don't think it matters if Obama wins in Nov or the Republican does. I don't see it changing, other than, if Romney or Santorum wins, the two sides will just flip-flop, with Dems fighting everything coming from the administration as hard as they can, just as the Republicans do now. It'll still be a stalemate. Wish I knew the answer.

  • Report this Comment On February 18, 2012, at 11:00 PM, deborahyetts wrote:

    i think the answer is in the citizens of this nation,you cannot move into a new house and think that your exspenses will decrease,thats the same with the deficeit,you also can't pretend that if you don't look at something that it is not there, we as a nation have been engaged in this silly type of behavior forever-we can control the corporate greed that has been the true culprit in the demoralizing of anyone that has to produce their own paycheck-that is with global and national boycott of all corporations(people, says our "just" supreme court) that capitalize off the backs of their employees-we have got to remember with their collected wealth that they can control everyone like puppets,personally my strings have been pulled enough-be one on one if you must and it has nothing to do with my class i can except anything that acheive or not for myself as long i make and pay a fair price for my life.

  • Report this Comment On February 19, 2012, at 1:45 AM, CrankyTexan wrote:

    deborahyetts, since you hate capitalism, what do you prefer? Socialism or communism?

  • Report this Comment On February 19, 2012, at 1:46 AM, CrankyTexan wrote:

    deborahyetts, the purpose of a corporation is to profit. The reason YOU go to work is to profit. If corporations are greedy, then you are greedy too.

  • Report this Comment On February 20, 2012, at 3:40 AM, ibuildthings wrote:

    The social issues have a big effect on economic issues. We don't want to tell people how to live their lives, so they are free to make some dumb choices. But then they become victims of "bad luck" and the government is expected to pay for the outcomes.

    Kids used to study hard in school even when they would rather do something else, because they knew that when they were adults, they had to be able to support themselves. But now its always someone else's fault. The real victims, the people who really got sick, or got wounded in Iraq, or some other misfortune have to share our kindness with an army of deadbeats who know more about video games and cell phones than they do about math.

    People must take an interest in their own progress. If we restructure our economy and other way, motivation is out the window.

    This isn't to say we shouldn't provide safety nets. But if people struggled as hard to be productive as they do to be pretty, we would spend a lot less on "Income security" and the real victims would get paid a lot more.

  • Report this Comment On February 20, 2012, at 11:44 PM, sjbpa wrote:

    Warren Buffett is a true patriot to me. He sees his country hurting and knows through a lifetime of different tax rates that he is not paying his fair share. I think he is brave to speak out. Raising the very rich person's tax rate to post WWII rates would help immensely.

    Social Security can easily be fixed by removing the cap on who pays into it.

    My knowledge of world history is lacking, for certain. Could anyone tell me if any other country in the history of the world went to war and lowered taxes at the same time?

  • Report this Comment On February 21, 2012, at 12:23 AM, CrankyTexan wrote:

    Warren Buffett is a phony.

    He says he wants to pay more taxes, but he chooses not to. He can send extra money to the IRS, but he choose not to.

    He owes BACK TAXES. That's something the mainstream media will not tell you.

  • Report this Comment On February 21, 2012, at 12:24 AM, CrankyTexan wrote:

    If you are rich and you want liberals to love you, just pretend that you want to pay more taxes. You never actually have to do it.

  • Report this Comment On February 21, 2012, at 11:00 AM, DJDynamicNC wrote:

    Cranky, funny how you choose to measure from inauguration day as though trendlines don't matter.

    What a remarkably easy way to hide any gains if things continued to get worse for a bit but then began to get better - which is sort of what you'd expect if the situation in question involved a massive economy that might take some time to respond to policy initiatives, particularly initiatives that had been watered down.

    I wonder what would have happened if somebody somewhere had tried proper Keynesianism? Let's ask Bloomberg:

    http://www.bloomberg.com/news/2012-02-20/icelandic-anger-bri...

    Oh, but Bloomberg is a noted socialist rag. Let's try the Wall Street Journal. Surely they have a proper prescription for austerity:

    http://blogs.wsj.com/economics/2012/02/08/eu-commissioner-sa...

    Gasp! Socialism everywhere! My god!

  • Report this Comment On February 21, 2012, at 12:40 PM, steltek wrote:

    The AMT *really* needs to go away. What we really need is an "alternative MAXIMUM tax" -- whereby no person should have to pay MORE than 30% of total income to all tax sources for a year.

    I know many people in Silicon Valley who have had to pay more in taxes than they earned in a year because of AMT and stock options that are underwater (worth less than their market price).

    I even saw a company put out of business because its AMT obligations (when it was acquired by a public company) outstripped its earnings for the year. I know it's rare, and this was a nascent startup with only a few million in revenue, but it does happen. (The acquiring company closed the entire office and sold off the acquired products and still posted a loss, even though it had been profitable.)

    Stupidest tax law ever made. It's sickening that public officials are actually greedy about taking money from citizens, when it's not even money they get personally. Just the fact that they get to decide how the money is spent makes them greedy, instead of fair. In Louisiana, they lowered red light times to increase photo ticket revenues, despite the fact that their research showed that this increased deaths and injury from accidents. We've got to get rid of the "us vs. them" greed mentality of elected officials. They're supposed to serve the will of the public, not find ways to profit at the public's expense, without regard for people's welfare -- financial or physical.

  • Report this Comment On February 21, 2012, at 12:51 PM, steltek wrote:

    I also agree Buffett is a phony -- at least as far as the tax issues go. If he believed in the U.S. government, he would be buying bonds, instead of stocks. And, if he really wanted to make a difference for government spending, he would offer a CDS on those bonds to give the government extra money. Or, he would just bequeath his fortune to congress instead of to charity. But even Buffett knows money does far more good in the hands of charity than in the hands of the government. Efficient charities like the Red Cross see 95% of donations go to their intended destination. With the U.S. govt, the most you'll see is about 70% with the other ~30% going just to pay interest on deficit spending. Buffett undoubtedly realizes this. If you really wanted to help people, would you give your money to charity or to the government? Think about it.

  • Report this Comment On February 21, 2012, at 2:14 PM, DJDynamicNC wrote:

    I'm interested in hearing which charity would take care of EVERY senior with the same level of efficiency and effectiveness as Social Security and Medicare.

  • Report this Comment On February 21, 2012, at 4:23 PM, setht23 wrote:

    @DJDynamicNC

    I'm interested in hearing which charity could take money out of my paycheck to pay for a "retirement" plan that very likely I will never see any of. It's not Social Security to me, it's theft.

  • Report this Comment On February 21, 2012, at 4:54 PM, CrankyTexan wrote:

    >>> I'm interested in hearing which charity would take care of EVERY senior with the same level of efficiency and effectiveness as Social Security and Medicare. <<<

    lol. Social Security and Medicare are efficient???? They are bankrupt and extremely inefficient.

  • Report this Comment On February 21, 2012, at 4:56 PM, CrankyTexan wrote:

    When a program takes money from one person to pay another person's benefits, it's called a Ponzi scheme.

  • Report this Comment On February 22, 2012, at 11:16 AM, DJDynamicNC wrote:

    Setht - goodness, you're right, we'll never get to see any social security benefits without such galaxy-shaking modifications as lifting the payroll tax cap and... well, actually, that's about all it would take.

    Cranky - I'm not sure what definition you use for "efficient," but an insurance provider that delivers more care for lower costs with reduced overhead and reduced administrative costs and zero profit requirements and no marketing outlay strikes me as wildly more efficient.

    I am, however, looking forward to hearing about how delivering more care for lower costs doesn't really count as efficiency because health care isn't paid for with the gold standard or whatever.

    Also, please read:

    http://en.wikipedia.org/wiki/Ponzi_scheme

    When we are all using the same definitions for the same words, communication will be much easier.

  • Report this Comment On February 22, 2012, at 11:19 AM, TMFMorgan wrote:

    <<When a program takes money from one person to pay another person's benefits, it's called a Ponzi scheme.>>

    Then every insurance company in the world is a ponzi scheme. Geico, Liberty Mutual, Farmers ... etc.

  • Report this Comment On February 22, 2012, at 6:12 PM, CrankyTexan wrote:

    >>> Then every insurance company in the world is a ponzi scheme. Geico, Liberty Mutual, Farmers ... etc. <<<

    Wrong again. The whole purpose of insurance is IN CASE something goes wrong. Insurance customers hope to never need insurance benefits.

    Social Security is something that EVERYONE plans to use. Same thing with Bernie Madoff. ALL of his investors planned to withdraw their funds at some point.

  • Report this Comment On February 22, 2012, at 6:19 PM, CrankyTexan wrote:

    DJDynamicNC, the government was not meant to take care of you. The government was not meant to control hospitals and doctors.

    Since you want government to destroy health insurance companies and take over healthcare, what else do you want? Do you want government to destroy supermarkets and control food distribution? Do you want government to destroy banks and control mortgages? Do you want government to destroy supermarkets and control food distribution? Do you want government to destroy clothing stores and control clothing distribution?

    Because wanting these things is no different than wanting government to destroy health insurance companies and control healthcare.

  • Report this Comment On February 22, 2012, at 6:49 PM, CrankyTexan wrote:

    It's bad enough that Social Security is mandatory. I don't want corrupt and incompetent politicians touching my retirement fund. I have been crushing the market since 1999. Social Security is a waste of capital to me.

    If Social Security MUST exist, then each person's funds should be UNTOUCHED. And everyone should be able to buy stocks with their funds.

  • Report this Comment On February 22, 2012, at 9:16 PM, kyleleeh wrote:

    <<Wrong again. The whole purpose of insurance is IN CASE something goes wrong. Insurance customers hope to never need insurance benefits.>>

    I'm pretty sure that people who purchase annuities from an Insurance company plan on using it.

  • Report this Comment On February 22, 2012, at 10:14 PM, CrankyTexan wrote:

    >>> I'm pretty sure that people who purchase annuities from an Insurance company plan on using it. <<<

    Apples and oranges. Annuities are not insurance.

  • Report this Comment On February 22, 2012, at 10:19 PM, kyleleeh wrote:

    <<When a program takes money from one person to pay another person's benefits, it's called a Ponzi scheme.>>

    That is how annuities work, just ask someone who had an AIG annuity.

    <<Apples and oranges. Annuities are not insurance.>>

    It's income insurance, that's why insurance companies issue them.

  • Report this Comment On February 22, 2012, at 10:31 PM, CrankyTexan wrote:

    Kyle, if you are trying to defend Ponzi schemes, it would behoove you not to use annuities as an example. Annuities are products designed for suckers. Anyone with basic investing proficiency knows to avoid them. Kinda like payday loans.

  • Report this Comment On February 22, 2012, at 10:39 PM, CaptainWidget wrote:

    <<Then every insurance company in the world is a ponzi scheme. Geico, Liberty Mutual, Farmers ... etc.>>

    Geico's books balance, the SS lockbox does not. Pretty important difference.

    Another major difference is that Geico's customers can go to Liberty Mutual if they feel they're not getting their money's worth. A social security recipent cannot.

    I think this comparison between the social safety net and private insurance needs to die......quickly. They're completely different entities.

  • Report this Comment On February 22, 2012, at 10:43 PM, CrankyTexan wrote:

    >>> social safety net <<<

    More like social sucker net.

  • Report this Comment On February 22, 2012, at 11:05 PM, kyleleeh wrote:

    <<Geico's books balance, the SS lockbox does not. Pretty important difference. >>

    Based on what? The extremely accurate track record of the CBO in making long term budget predictions? Not to say you couldn't turn out to be right, but it takes a lot of hubris for anyone to think they make an accurate prediction of how the next 40 years will turn out.

    <<Kyle, if you are trying to defend Ponzi schemes, it would behoove you not to use annuities as an example. Annuities are products designed for suckers. >>

    I'm not defending them at all, but SS and annuities don't fit the definition of a Ponzi scheme because they are not falsifying the gains they are receiving on the assets they hold...that is the key criteria of a Ponzi scheme.

  • Report this Comment On February 22, 2012, at 11:39 PM, CrankyTexan wrote:

    >>> don't fit the definition of a Ponzi scheme because they are not falsifying the gains they are receiving on the assets they hold...that is the key criteria of a Ponzi scheme. <<<

    Buzzzzzzzz! Wrong (again). A Ponzi scheme pays benefits to some customers using funds from other customers. Had Bernie Madoff been honest about the gains of his investments, he still would be in jail FOR SPENDING HIS CUSTOMERS' MONEY INSTEAD OF INVESTING IT FOR THEM. Just like Social Security.

  • Report this Comment On February 22, 2012, at 11:40 PM, CrankyTexan wrote:

    Just do a simple internet search on the definition of a Ponzi scheme. Please.

    Sheeesh.

  • Report this Comment On February 22, 2012, at 11:49 PM, CrankyTexan wrote:

    And by benefits, I mean money the customers already own. This is different than insurance, in which the customers do not own benefits unless something goes wrong such as a car accident.

  • Report this Comment On February 22, 2012, at 11:54 PM, kyleleeh wrote:

    False returns ARE a requirement for a Ponzi scheme otherwise it would never unravel because the total sum of all client accounts would be exactly equal to total sum of the fund. The only a way a Ponzi scheme would work is to tell your clients you made money that you never made, otherwise it's no different from a hedge fund. All the money is pooled into one account and invested, and clients are given a statement telling them how much their share is worth.

  • Report this Comment On February 22, 2012, at 11:57 PM, kyleleeh wrote:

    Do you really think a fund with 100000 investors is going to open 100000 brokerage accounts all with the same holdings? No all funds pool money and pay other investors with money you put in.

  • Report this Comment On February 23, 2012, at 12:00 AM, CrankyTexan wrote:

    Wrong again. False returns are not what busted Madoff. Madoff was busted because the stock market crashed a few years ago which caused most of his investors to withdraw their funds. When the funds were not available (because Madoff spent them), Madoff was busted.

  • Report this Comment On February 23, 2012, at 12:01 AM, CrankyTexan wrote:

    Google "Full Tilt Poker". They are another recent alleged Ponzi Scheme. They never promised any returns. They were an online casino, not a brokerage.

  • Report this Comment On February 23, 2012, at 12:09 AM, kyleleeh wrote:

    Exactly, he lied about the amount of money the fund was making. If had been truthful about the funds previous performance over the past decades and reported losses instead of falsely reporting gains, all his clients accounts would have been exactly equal to the funds total assets and all withdraws would have been covered...just like a hedge fund.

    <<he still would be in jail FOR SPENDING HIS CUSTOMERS' MONEY INSTEAD OF INVESTING IT FOR THEM>>

    Exactly again, he "falsely" reported investing the money and making a gain when in truth he did not...thank you for proving that falsifying returns is a prerequisite for a Ponzi scheme.

  • Report this Comment On February 23, 2012, at 12:11 AM, CrankyTexan wrote:

    Show me where Full Tilt Poker lied about gains, genius.

  • Report this Comment On February 23, 2012, at 12:15 AM, CrankyTexan wrote:

    When the government takes your money for Social Security, they do not invest the money for you. They SPEND IT. Then they tell you you will get your money back someday when you retire. I am not counting on it.

  • Report this Comment On February 23, 2012, at 12:38 AM, CrankyTexan wrote:

    >>>> If had been truthful about the funds previous performance over the past decades and reported losses instead of falsely reporting gains, all his clients accounts would have been exactly equal to the funds total assets and all withdraws would have been covered <<<<

    No. No. No. MADOFF SPENT BILLIONS OF THEIR DOLLARS WITHOUT THEIR KNOWLEDGE.

    Sheesh. Use Wikipedia.

  • Report this Comment On February 23, 2012, at 12:47 AM, kyleleeh wrote:

    Spending their money=losses

  • Report this Comment On February 23, 2012, at 12:48 AM, CrankyTexan wrote:

    >>> Spending their money=losses <<<

    Not the type of losses you were talking about 10 minutes ago.

    But we both agree that theft = losses.

  • Report this Comment On February 23, 2012, at 1:03 AM, kyleleeh wrote:

    I think a better way to phrase it would be if a Ponzi scheme is honest about all it's gains and losses then how would this Scheme ever unravel? If you lose 10% and deduct 10% from all your clients holdings, how are you not sustainable? It only works if you're fraudulent about gains and losses.

    Full tilt Poker claimed to be profitable and paid the owners out millions when in truth the profits never occurred, instead they paid themselves the money their clients had deposited into their accounts. If they had NOT falsely claimed profits and not paid themselves those false profits, all accounts would be payable...hence my position of false reporting of gains or losses is a prerequisite of a Ponzi scheme.

  • Report this Comment On February 23, 2012, at 1:09 AM, CaptainWidget wrote:

    <<Based on what? The extremely accurate track record of the CBO in making long term budget predictions? Not to say you couldn't turn out to be right, but it takes a lot of hubris for anyone to think they make an accurate prediction of how the next 40 years will turn out.>>

    Common sense will suffice.

    Of course you could put your money where your mouth is. Don't take your earned income tax credit for additional SS payments over the cap. Just let the SS department keep it as a prepayment to all the wonderful benefits you anticipate to receive from them after you retire.

    I'll investment all my additional monies in index funds.

    We'll see who comes out ahead. Read, set, start saving!

  • Report this Comment On February 23, 2012, at 3:03 AM, kyleleeh wrote:

    Common sense tells us nothing about:

    Future immigration rates

    Future birth rates

    Future life expectancy

    Future GDP

    Future tax rates

    Future changes to the way the cost of living adjustment is calculated

    Again, like I said you may very well turn out to be correct. I'm certainly not pinning my retirement on SS, but I'm not any more concerned about not being able to get my SS back because of insolvency then I am about not getting the money in my IRA or 403b back because of a meteor hitting the Earth...in both cases nobody has any clue if it will happen or not.

  • Report this Comment On February 23, 2012, at 3:19 AM, kyleleeh wrote:

    I said:

    <<If you lose 10% and deduct 10% from all your clients holdings, how are you not sustainable?>>

    Solvent would be a better choice of words then sustainable

  • Report this Comment On February 23, 2012, at 10:25 AM, CrankyTexan wrote:

    >> > If they had NOT falsely claimed profits and not paid themselves those false profits <<<

    Ummm, that never happened. They never claimed to spend only their profits. They spent their customer's PRINCIPAL.

  • Report this Comment On February 23, 2012, at 10:35 AM, DJDynamicNC wrote:

    "Common sense will suffice."

    You are literally arguing that you don't need to pay attention to long term trends or figures or math because you have "common sense."

  • Report this Comment On February 23, 2012, at 10:40 AM, CrankyTexan wrote:

    >>> You are literally arguing that you don't need to pay attention to long term trends or figures or math because you have "common sense." <<<

    The long term trend continues to be that the government spends your Social Security funds instead of investing them.

  • Report this Comment On February 23, 2012, at 10:44 AM, CrankyTexan wrote:

    DJDynamicNC and kyleleeh, since you have faith in Social Security, and seem excited to give your money to it, I have a bridge to sell you. Please call me at 1-800-SUCKERS

  • Report this Comment On February 23, 2012, at 11:03 AM, DJDynamicNC wrote:

    The ultimate question for me, of course, is not whether I'd do better by investing for myself vs investing in Social Security. I'll do fine either way. If there was no Social Security, I'd survive just fine. I'm a planner.

    There are a lot of people for whom this isn't true. For many of those people, Social Security is literally a lifesaver. There's no begging for charity. There's no shame in receiving it, since they paid into it. There are no worries about the market tanking just before you retire. There's no need to learn any kind of investing techniques. You just work hard, and then you retire in peace.

    I'm the kind of guy who thinks that a nation full of people able to retire in dignity and health is worth a few bucks out of the paycheck.

    I don't see why this is a problem for people. Do you think you don't have to do anything to benefit from living in the United States? Do you think you really don't derive any utility from a nation full of people who have the money to buy things and drive business? Do you really feel like the best outcome for the nation full of human beings (who act like human beings and fail to fully prepare for retirement) is to simply condemn them to suffer and struggle and die so that you can be smug about your wise investment decisions?

  • Report this Comment On February 23, 2012, at 11:17 AM, CrankyTexan wrote:

    >>> Do you really feel like the best outcome for the nation full of human beings (who act like human beings and fail to fully prepare for retirement) is to simply condemn them to suffer and struggle and die so that you can be smug about your wise investment decisions? <<<

    Oh brother. The government's job is not to hold your hand. The government's does not know better than you. It is YOUR job to take care of you.

    I'm amazed you have so much faith in a corrupt government that has to borrow money every year just to pay the interest on its debt.

  • Report this Comment On February 23, 2012, at 11:18 AM, CrankyTexan wrote:

    >>> simply condemn them to suffer and struggle and die <<<

    Typical leftist drivel. Next you you tell us that people will die on the street if Obamacare is ruled unconstitutional by the SCOTUS.

  • Report this Comment On February 23, 2012, at 11:23 AM, CrankyTexan wrote:
  • Report this Comment On February 23, 2012, at 1:36 PM, kyleleeh wrote:

    That article says SS isn't ENOUGH to retire off of not that it will fail. Nobody said SS by itself would be enough to retire, just that it may not be as insolvent as you're claiming.

    Here, this is from YOUR article:

    "Fortunately, all is not lost. For one thing, Social Security isn't likely to go away, despite reports of its imminent death."

    You REALLY, REALLY, need to work on that selective hearing of yours.

  • Report this Comment On February 23, 2012, at 1:40 PM, CrankyTexan wrote:

    "Fortunately, all is not lost. For one thing, Social Security isn't likely to go away, despite reports of its imminent death"

    I agree. Saying that Social Security will go away is like saying that big government will go away. Government Ponzi schemes will not go away.

  • Report this Comment On February 23, 2012, at 1:40 PM, CrankyTexan wrote:

    You were the one who said that will people will die if they don't get their tiny Social Security checks.

  • Report this Comment On February 23, 2012, at 1:42 PM, CrankyTexan wrote:

    Oh wait, that wasn't you. I am getting my leftists confused.

  • Report this Comment On February 23, 2012, at 1:47 PM, DJDynamicNC wrote:

    "Oh brother. The government's job is not to hold your hand. The government's does not know better than you. It is YOUR job to take care of you. "

    It's interesting that "the governments job" only ever seems to be whatever YOU think the government's job should be.

    In truth, the government's job is to reflect the will of the people through the vessels constructed by the Constitution. The will of the people clearly indicates a desire for a sane, compassionate policy of provding for Social Security. Disagree all you like, but the nation is free to make that decision and the government is then bound to live by it. As are you.

    I am proud to live in a nation that values its citizens and recognizes their humanity while allowing for their imperfections. I am proud to contribute to a program that has enabled millions of Americans to enjoy a retirement of dignity and peace after spending a lifetime working. I am proud to stand with the millions of Americans who consistently reject your cynical view of the world and embrace a rational and compassionate view of the rights and responsibilities of mankind.

    Very proud.

  • Report this Comment On February 23, 2012, at 1:57 PM, CrankyTexan wrote:

    >>>The will of the people clearly indicates a desire for a sane, compassionate policy of provding for Social Security. <<<

    Bull CRAP. Unless your definition of "people" is hardcore leftists.

    >>> Disagree all you like, but the nation is free to make that decision and the government is then bound to live by it. As are you. <<<

    There's this little document you may have heard of. It's called the Constitution. This prevents certain laws from passing.

    >>>. I am proud to contribute to a program that has enabled millions of Americans to enjoy a retirement of dignity and peace after spending a lifetime working. <<<<

    You are proud to fund a Ponzi scheme that discourages people from saving enough money for retirement.

  • Report this Comment On February 23, 2012, at 1:59 PM, DJDynamicNC wrote:

    Your argument is that people who don't save enough for retirement or get hit with a crash right before they retire or get screwed by the job market or go bankrupt from sickness or make a bad choice early on that impacts them for life should all suffer because it's not your job to take care of them and they have it coming.

    To shorten that - to you, increasing the suffering of other Americans is a feature, not a bug.

    Since this punishment will be inflicted on people in their retirement, it occurs AFTER it is too late for them to do anything about it but suffer. And the threat of this happening is already not enough to get most people to save. So they rely on the social security THAT THEY PAID FOR to live. Removing that doesn't improve the situation for the vast majority of people and does not address the problem at all. All it does is put a little more money in your pocket and punish millions of Americans.

    You think that causing more suffering is a feature, not a bug, or at the very least is not a problem so long as you can keep your money while still benefiting from the nation in which you live without paying in to maintain it.

    It's honestly breathtaking.

    None of these are accusations. You've clearly expressed all of these sentiments.

    You poor soul. It must be hard to bear such a burden of bitterness every day.

  • Report this Comment On February 23, 2012, at 2:07 PM, CrankyTexan wrote:

    >>> To shorten that - to you, increasing the suffering of other Americans is a feature not a bug. <<<

    Listen moonbat, I am not responsible for the suffering of people who refuse to take care of themselves. I do not "increase their suffering". If a person wants to blow all his money instead of saving for retirement, THAT'S HIS FAULT. Dennis Miller said it best.... "I wanna help the helpless, but I could careless about the clueless"

    >>> So they rely on the social security THAT THEY PAID FOR to live. Removing that doesn't improve the situation for the vast majority of people and does not address the problem at all. <<<

    I am not talking about withholding benefits for people who already paid payroll taxes, you moron. I am talking about ending the Social Security Ponzi scheme gradually.

    >>> All it does is put a little more money in your pocket and punish millions of Americans.<<<

    WTF are you talking about? How does letting me keep my money punish other people? You are mentally ill.

  • Report this Comment On February 23, 2012, at 2:09 PM, Turfscape wrote:

    I think there's good opportunity in these comments to learn an important lesson:

    Increasing the volume of one's message does not increase the accuracy or logic of one's message.

  • Report this Comment On February 23, 2012, at 2:10 PM, CrankyTexan wrote:

    You are actually unintentionally making my point. You are saying that other people suffer IF I DO NOT CONTRIBUTE to Social Security. You are admitting that MY MONEY is given to other people. It's called a Ponzi scheme, genius.

  • Report this Comment On February 23, 2012, at 2:14 PM, CrankyTexan wrote:

    Defending Social Security is no different than defending Bernie Madoff. Only scumbags and idiots defend Social Security.

  • Report this Comment On February 23, 2012, at 2:17 PM, CrankyTexan wrote:

    If you insist on forcing people to save for retirement, then you should abolish Social Security, and force people to invest regularly into an index fund that no one else can touch.

    Of course, it's best not to force people to do anything.

  • Report this Comment On February 23, 2012, at 2:20 PM, DJDynamicNC wrote:

    "Defending Social Security is no different than defending Bernie Madoff. Only scumbags and idiots defend Social Security."

    I think I can rest my case.

  • Report this Comment On February 23, 2012, at 2:21 PM, CrankyTexan wrote:

    DJDynamicNC, since you believe in bailing out people who are financial idiots, I will go to Las Vegas tomorrow and spend my entire life savings on Keno and expensive wine. Then you can send me a big fat check to end my "suffering".

    If you refuse to send me a check, then "all it does is put a little more money in your pocket and punish a fellow American."

    Sheeesh.

  • Report this Comment On February 25, 2012, at 8:30 PM, geezer27606 wrote:

    Obama's budget and all the Republican candidate proposals continue the present scheme of taxing poor working people who don't have lobbyists with a 19% Federal flat income tax hidden in "employment taxes" and price increases from passed through "business" taxes. They all also continue the practice of sending government checks to rich people who do have lobbyists. We badly need real reform on taxes, entitlements, and subsidies.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1780688, ~/Articles/ArticleHandler.aspx, 11/24/2014 5:01:23 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement