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November 7, 2012


Replies: 56

The Challenges Ahead

Poopgoblyn Featured By Owner Nov 7, 2012
Unless somehow or other you were in a coma, the word on the street is that President Obama retains his job as President, and poor ol' Mittens goes home in shame. Congratulations to him and Democratic party. Congress is still in control by the GOP and the Senate is still Democrat leaning. What's more is Benny get's to keep printing those delicious dollars. Perty much, nothing has changed. Oh except my pocket book since Gold prices went up $50 overnight (I'm kidding I foolishly sold all mine in 09').

But as the next four years unfold our President has some unique challenges to face.
First, the main challenge would be trying to make up the 1 trillion dollar deficit and subsequently, increase, of our debt. Trillion dollars is about 1/3rd of our entire budget. 2/3rds of which we can pay, and the other 1/3rd we cannot. Try to conceptualize a trillion. If we are counting in seconds, 1 million would be about 12 days. 1 billion is over 31 years. One trillion is about 36,000+ years.
Such debt is unsustainable, and according to Mike Shedlock from Global Economic Trend Analysis, even if the government taxed 100 percent of profits from every corporation in America and confiscated every single asset of the super-wealthy (like Warren Buffet and Bill Gates), it still wouldn’t even get close to balancing the budget. We would still have to “take the combined salaries of all players in the nfl, Major League Baseball, the nba and the nhl, cut military spending by $254 billion, and tax everything people make above $250,000 at a 100 percent tax rate,” Shedlock says.

Of the more than $1 trillion America borrowed last year, about half was money the Federal Reserve created out of thin air. Why? Because foreign investors would not lend it at the interest rates America wanted.
As huge as America’s deficit is, the bigger threat is America’s practically unfathomable debt. America’s official federal debt is over $16 trillion, but that is only the tip of the iceberg. America has promised its citizens tens of trillions more in Social Security, Medicare and Medicaid benefits. Laurence Kotlikoff, professor of economics at Boston University, puts America’s total liabilities at a mind-boggling $222 trillion.

President Obama will have to cut many if not most of the promises that have been made to retirees—and even if he cuts them all, his government will still owe that official $16 trillion.

This could spell out a crippling blow to the Democrats come 2016, as there will be a good number welfare services that WILL be cut. And unfortunately, the way our economic system is built right now, reducing the welfare is going to damage the economy, as so many people are utterly dependent on that flawed model.

And speaking of welfare; the U.S. federal government now funds 79 welfare programs: 11 programs just for housing assistance, 12 for social services, three for energy and utility assistance, 12 for food aid, 12 for various education assistance—on top of nine for vocational training, three for childcare and child development, seven for medical assistance and 10 providing cash assistance. All of which amounts to over a trillion dollars of our budget. And in the next 10 years it is projected to rise to 1.54 Trillion.
There is no easy fix. In fact, there may be no fix at all. About one in three Americans get some sort of government handout. Politicians can cut spending—but not without massively damaging the economy. The economy is addicted to government spending. There are whole industries that cater to welfare dependency. Go cold turkey, and the president can expect massive economic, if not social, upheaval. But, something must be done!

In 2010, U.S. regulators told America’s biggest banks that they needed to make plans for preventing collapse. The regulators emphasized that the banks needed to consider radical measures to prevent failure and that they could no longer count on government support. Five years after the 2008 Wall Street meltdown, the banking system is still no more secure. Bank insiders know it isn’t safe, and the one thing propping it up—the heavily indebted federal government—says it is now pulling out.

Yet, because America’s economy is debt-based and consumption-driven, if regulators try to rein in the big banks, they will have to reduce lending. Reduced lending means the economy will slow even further. Jobs will be lost, tax revenues will fall, welfare usage will increase, and paying the debt will become that much harder. It’s an unsolvable problem for President Obama, yet it is a problem that must be addressed.

I am hoping that now that the President does not have to campaign for the next 4 years he will be able to tackle some of these issues head on.

I suspect though, that the strong measures that would need to be taken would leave a foul stench among st the more ardent liberal crowd within the Democratic circles. I think a lot of people are going to be very disappointing, and a lot more facing real, and devastating problems before we are out of this, as we would be more and more pressured to reel in the welfare spending.

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Devious Comments

EbolaBearVomit Featured By Owner Nov 9, 2012
Why is the topic only about Obama?

The principle players are all at odds with one another AND the lobbies still have their influence fucking things up. How does one person get saddled with cleaning the house when so many others live in the same house and have as much to do with the mess?
Poopgoblyn Featured By Owner Nov 9, 2012
Because this topic is about Obama, who just won the Presidency, who kind of has the power to veto things, and is a pretty big deal.
maddmatt Featured By Owner Nov 13, 2012
:iconobamaplz::iconsaysplz: I'm not sure you were aware, but I'm kind of a big deal.
RestInMotion Featured By Owner Nov 13, 2012
You can't veto something that isn't brought to you. The fact remains that the Senate and House are as much to blame as Obama, if not more.
Poopgoblyn Featured By Owner Nov 13, 2012
im not blaming anyone here
EbolaBearVomit Featured By Owner Nov 11, 2012
Yeah and?
He's only part of the problem that includes numerous snags.
Poopgoblyn Featured By Owner Nov 13, 2012
Yeah, and I am presenting specifically the challenges that President Obama will face.
tehbigd Featured By Owner Nov 8, 2012
On tackling the debt, there's really only one solution: decrease spending, increase revenue. What we should acknowledge is that we might not be able to immediately fix anything, only make it less bad

A decrease in spending can only come from one of a few sources and not unduly injure the poor. But 100$ hammers should not be the norm, but it's a problem with health care, military spending, and likely any number of other projects: inflated costs. Cutting unemployment, food stamps, and medical care coverage are all bad ideas. Better ideas? Spend the money wisely.
For instance: birth control is insanely cheap compared to carrying out a pregnancy, why is there opposition to free birth control? Aspirin costs almost nothing, but hospitals charge anyone who stays 20$ a pill, because customers are insured and won't see the cost. We are estimated to spend nearly $400 billion on the F-35, a Swiss Army Knife of a plane to replace a what amount to bowie knives for one service, screwdrivers for another, and tweezers for the last. Does every hospital need so many expensive machines? Is it wise to test for everything when testing for the most likely cause of a set of symptoms is cheap and easy to test for and treat? The key really isn't cuts, the key is savings. Our government isn't cutting coupons. It's not doing comparative shopping. What it's doing is buying those expensive sound cables that do nothing for audio quality.

An increase in revenue? The only choice we have here is increasing taxes. Broadening the base really can't be done without hitting up the poor, and doing that is counter-productive. So what to do? Start somewhere, and increase taxes for those making more than 250K a year to their Clinton-era totals.
Hitting 100% is not good, but we have, at times, hit a 90% tax rate for top earners, and those were considered good years. We have also, at times, had actual laws limiting the amount of money people could earn personally; which may need to go into effect. We haven't really taken any drastic action on this part, but if things continue badly, we might just have to.
Poopgoblyn Featured By Owner Nov 9, 2012
The kind of decrease in spending you propose is chump change in comparison to the amount of welfare expendetures that the government provides. There is no real solution to the budget unless you fundamentally tackle that welfare expendeture head on. A better question would be what Americans, as a society, define the role of government to be. If Americans truly want the role of government to be a personal care-taker, a nanny-state, as some call it, then they need to prepare to offer up the kind of revenue to support it.

You propose increasing the taxes on everyone making over 250k a year to their Clinton Era totals. I'm not sure how much of a great idea that is because we need to strive to do everything we can to increase the number of businesses that are in America so we can provide stable jobs. An increase in taxes does discourage businesses from staying. Can we also agree then that if we were to revert to Clinton era taxation levels, can we also agree that we may need to revert to Clinton era spending levels?

Furthermore, let's also talk about the total taxes that businesses do have to pay. Already the income tax on people earning more than 350k is about 35% federally. If they live in a state like California, which now has an additional 13.3% (as of this election), their total tax that they have to pay is about 48.3% of their income. That's nearly half. So if you are making 350k at the end of the year, you will be walking away with about 172-5k. It's a pretty huge deterrent to anyone who wants to establish a business, grow, and become prosperous.

When there was a 94% top rate in 1944-45, there were so many deductions and exclusions that the taxable income was not comparable to someone's entire income. First, the top rate started at $200,000, which today is equal to $2,413,059.90 — so the maximum EMTR would apply only to incomes of $2.5 million. But, that's still taxable income, not earned income.

In 1944, you could deduct business meals, all business travel, all forms of interest payments, and much more. You could even deduct spousal travel expenses on a business trip! (Why travel alone?) Companies could also "loan" or "provide" almost anything to an employee, from an apartment to standard benefits. It was possible to shelter tens of thousands of dollars from taxable income. Three-martini lunches and expense accounts were important realities, skewing tax calculations.

As a result of deductions and exclusions, even the theoretical maximum Real Rate of taxation at 60% in 1944 overstates taxation dramatically. The reality? On earned income, the richest U.S. taxpayers paid close to 40 percent of their earned incomes in taxes in 1944.

Even if you cut all the services that government can cut right now without needing to pass laws (ie. non SS, Medicare, and other welfare programs) you will still not have enough revenue coming in to pay the bills.

Furthermore, the 90% tax on income was a completely diffirent tax structure that was not how we interpret it today.
tehbigd Featured By Owner Nov 9, 2012
I wouldn't be so sure that potential savings are chump change: nixing the F-35 alone could save at least a hundred billion, if not more. Every bit helps, and there's any number of places to look for savings. Efficiency is the key.

You propose increasing the taxes on everyone making over 250k a year to their Clinton Era totals.

I said it was a start, not the end-all solution.

I'm not sure how much of a great idea that is because we need to strive to do everything we can to increase the number of businesses that are in America so we can provide stable jobs. An increase in taxes does discourage businesses from staying.
Businesses don't spring from the rich like Athena from Zeus's head. There has to be a fertile soil, there have to be customers for a business to grow. The middle class are that soil, not the rich. The rich may be farmers in this analogy, but a farmer with a bunch of seeds in the desert is just as screwed as the farmer with none in the Mississippi floodplain.

Already the income tax on people earning more than 350k is about 35% federally. If they live in a state like California, which now has an additional 13.3% (as of this election), their total tax that they have to pay is about 48.3% of their income.
It doesn't work like that, the effective federal income tax rate for a single person earning 388,350$ is only 29%. The effective tax rate for the high end of the next lowest bracket, ~180K is 22%. That would mean that the effective federal income tax rate for everyone between 180 and 388K is between 22-29%. If you make 388,351, you will only pay 35% on the 1 dollar you make above 388,350. Anyone making roughly 390K is still taking home at least 275K after federal income taxes; and that's without deductions.
I will say that California has a lot of problems, though. Too many expenditures, not enough revenue, and the ballot-initiative system it has is often counter-productive. If I remember right, efforts to introduce high-speed rail have been foiled repeatedly once any planning is started several times; adding several billion to the cost of it every single time.
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