What Spending Cuts?

John Hinderaker posted an article at Power Line about the omnibus spending bill recently passed.

The article states:

…Which illustrates, for the umpteenth time, a point I have made over and over: budget/spending deals that purport to dictate spending many years into the future are a joke. No Congress can bind a future Congress. When a Congressman tells you that a purported ten-year deal cuts spending in the “out years,” grab your wallet and run. The out years never come.

***Because the defense cap was lower in 2014 under the original Budget Control Act, defense spending does not meaningfully increase from 2013 enacted levels. Nondefense spending, however, receives an increase that is 10 times larger than defense. The 5 percent rate of growth of nondefense spending is almost three times the projected 1.7 percent rate of inflation (see table below).

Spending Chart 02

As you can see, the budget does not decrease–it increases! Then why is the only actual cut the decrease in the cost of living adjustment (COLA) to military retirement?

The article concludes:

The other point that emerges from these spending numbers is that discretionary spending is relentlessly being squeezed out by entitlements. The real constraint on the growth of both defense and non-defense discretionary spending is the explosion in entitlements–Medicare, Medicaid, Social Security and now Obamacare. With the Democrats vowing to fight to the last ditch to resist any sort of entitlement reform, and with federal debt having risen to more than $17 trillion–another budget-crusher as soon as interest rates rise again–there is simply no money for the social spending boondoggles that the Democrats would dearly love to finance. I suppose we should count our blessings.

***This paragraph is taken from a Senate Budget Committee report.

 

 

 

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The Positive Impact Of Sequestration

On Sunday, Stephen Moore posted an article at the Wall Street Journal about the positive aspects of sequestration. The bottom line in the story is that because of sequestration the federal government is shrinking.

In fiscal 2013, the sequestration will save the government more than $50 billion.

The article explains the potential future impact of sequestration:

In other words, Mr. Obama has inadvertently chained himself to fiscal restraints that could flatten federal spending for the rest of his presidency. If the country sees any normal acceleration of economic growth (from the anemic 1.4% growth rate so far this year), the deficit is on a path to drop steadily at least through 2015. Already the deficit has fallen from its Mount Everest peak of 10.2% of gross domestic product in 2009, to about 4% this year. That’s a bullish six percentage points less of the GDP of new federal debt each year.

Discretionary spending soared to $1.347 billion in fiscal 2011, according to the CBO, but was then cut by $62 billion in 2012 and another $72 billion this year. That’s an impressive 10% shrinkage. And these are real cuts, not pixie-dust reductions off some sham baseline. Discretionary spending as a share of the economy hit 9.4% of GDP in fiscal 2010 but fell to 7.6% this year and is scheduled to slide to 6.4% in Mr. Obama’s last year in office.

There are still major problems with entitlement programs going broke (I would like to repeat myself here and say that Social Security is not an entitlement program. If you are going to call it an entitlement program, just give everyone the money they have paid into it over the years and stop payments.). Social Security, Medicare and Medicaid will eventually have to be reworked in order to make them viable, but I seriously doubt that will happen under a Democrat president. Partial privatization of all three programs would extend their viability, but would need politicians willing to take a political risk for the good of the country. Right now that’s not what we have in Washington.

 

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Counting The Real Cost Of The Immigration Bill

I suppose it is necessary to begin this article by saying that I support legal immigration. I think we should make it easy for educated, hard-working people to enter this country without jumping through hoops and spending excessive time and money. However, we have nothing to gain by welcoming people who will be a burden because they do not have the skills to hold down a job and support themselves. At that point immigration becomes another load on an economy that is struggling to move ahead.

Paul Mirengoff at Power Line posted an article today detailing the cost of the immigration bill currently under consideration.

The article at Power Line reports:

The Heritage Foundation has released its long awaited study of the cost to American taxpayers of legalizing the current population of illegal immigrants. The study, available here, estimates the cost at $6.3 trillion, at a minimum.

…The bottom line is that current illegal immigrants would receive around $9.4 trillion in government benefits and services over the course of their lifetimes, and would pay about $3.1 trillion in taxes. Hence, a net fiscal deficit of $6.3 trillion.

The numbers used in the calculation include such things as Social Security, Medicare, food stamps, public housing, public education, and community services such as police and firemen.

Again, I strongly encourage changing the legal immigration system to make it easier for hard-working people who want to work to come to America. I just don’t want to open the gates wide for people who will only add to the financial burden of the country.

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Is The Goal To Solve Problems Or To Punish The Rich?

The Hill posted an article today about the budget proposal expected to come from President Obama in the near future. One aspect of the budget will be to limit how much ‘the rich’ will be able to keep in their individual retirement accounts.

The Obama Administration says that this proposal will add ‘fairness’ to the tax code. The provision is expected to raise $9 billion in ten years. At this point, I would like to point out that the current budget deficit is approximately $16 trillion dollars, and the projected annual deficit for 2013 will probably be in the neighborhood of $1 trillion dollars.

Let’s look at this concept of ‘fairness’ for a moment. How is it fair to continue to take money away from people who earn it and give it to people who don’t? How is it fair to punish someone who has worked hard and been successful for their efforts and success? Who has decided that we need ‘fairness?’ In 2009, the top 1% of earners paid 36.73 percent of the taxes (according to the National Taxpayers Union). How is that fair?

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The Unintended Consequences Of Accountability

This article has two sources, an article in the U.K. Telegraph posted on March 30 and an article posted at Real Clear Politics yesterday.

As the British government struggles to keep pace with the expenses involved in providing a safety net for its citizens, some government programs are being phased out and combined with other programs. One of the programs under scrutiny is the sickness benefit program.

Iain Duncan Smith, the Work and Pensions Secretary. is attempting to combine dozens of different out-of-work benefits into a single payment with the aim of ensuring an individual is always better off working than collecting benefits. As part of that process, there is an assessment of the people on the sickness benefit program to determine whether or not they are fit to work. Some 878,300 people on that program decided to come off the program rather than submit to the assessment. We need to learn from this experience.

The article at Real Clear Politics looks at disability payments in America:

In 1960, when vastly more Americans were involved in physical labor of some kind, 0.65% of workforce participants between the ages of 18 and 64 were receiving Social Security disability insurance payments. Fifty years later, in a much healthier America that number has grown to 5.6%.

In 1960, 134 Americans were working for every officially recognized disabled worker. Five decades later that ratio fell to roughly 16 to 1.

I am sure that in most cases disability payments are warranted. In fact, I am sure that everyone who is disabled does not necessarily look disabled. I can think of one example in particular where a person received severe neck damage in a work-related car accident and on some days appears to be perfectly normal. On other days, that person can barely move. Unfortunately, there is no way of predicting which days are which. However, I do think there are people among us who would rather ride in the wagon than help pull it. The problem is that at this point we have too few people pulling the wagon and too many people sitting in the wagon.

Government workers have no incentive to cut disability payments–their jobs depend on administering these programs–if you cut the programs, you might have to cut the number of administrators. Government spending has become like the hamster on the exercise wheel–it keeps moving (and growing) but nothing is actually being accomplished.

If we are serious about ever balancing the federal (and states) budget, we need to take a serious look at who is receiving payments from that government and what the basis for those payments is. Until we are willing to help people enter the workforce instead of helping them enter generations of dependency on government, we will not solve our financial problems.

The Response To The State of the Union Address

For those of you who are not in shock by the fact that Marco Rubio actually took a drink of water, here is the video and some highlights from his speech Tuesday night.

The speech and video are posted at the Daily Beast. The video is also on YouTube. Here is the video:

A few highlights from the speech:

But America is exceptional because we believe that every life, at every stage, is precious, and that everyone everywhere has a God-given right to go as far as their talents and hard work will take them.

…This opportunity – to make it to the middle class or beyond no matter where you start out in life – it isn’t bestowed on us from Washington. It comes from a vibrant free economy where people can risk their own money to open a business. And when they succeed, they hire more people, who in turn invest or spend the money they make, helping others start a business and create jobs.

Presidents in both parties – from John F. Kennedy to Ronald Reagan – have known that our free enterprise economy is the source of our middle class prosperity.

…This idea – that our problems were caused by a government that was too small – it’s just not true. In fact, a major cause of our recent downturn was a housing crisis created by reckless government policies.

And the idea that more taxes and more government spending is the best way to help hardworking middle class taxpayers – that’s an old idea that’s failed every time it’s been tried.

More government isn’t going to help you get ahead. It’s going to hold you back.

More government isn’t going to create more opportunities. It’s going to limit them.

…And tonight, he even criticized us for refusing to raise taxes to delay military cuts – cuts that were his idea in the first place.

But his favorite attack of all is that those who don’t agree with him – they only care about rich people.

Mr. President, I still live in the same working class neighborhood I grew up in. My neighbors aren’t millionaires. They’re retirees who depend on Social Security and Medicare. They’re workers who have to get up early tomorrow morning and go to work to pay the bills. They’re immigrants, who came here because they were stuck in poverty in countries where the government dominated the economy.

The tax increases and the deficit spending you propose will hurt middle class families. It will cost them their raises. It will cost them their benefits. It may even cost some of them their jobs.

And it will hurt seniors because it does nothing to save Medicare and Social Security.

So Mr. President, I don’t oppose your plans because I want to protect the rich. I oppose your plans because I want to protect my neighbors.

Senator Rubio concludes:

This dream – of a better life for their children – it’s the hope of parents everywhere. Politicians here and throughout the world have long promised that more government can make those dreams come true.

But we Americans have always known better. From our earliest days, we embraced economic liberty instead. And because we did, America remains one of the few places on earth where dreams like these even have a chance.

Each time our nation has faced great challenges, what has kept us together was our shared hope for a better life.

Now, let that hope bring us together again. To solve the challenges of our time and write the next chapter in the amazing story of the greatest nation man has ever known.

Thank you for listening. May God bless all of you. May God bless our President. And may God continue to bless the United States of America.

The reason that a lot of the media has focused on Senator Rubio’s drink of water is that they don’t want you to hear the wisdom in the speech.

 

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The Facts Beneath The Noise

It’s time for both parties to threaten the American people with doom and gloom–the debt ceiling has been reached, and Washington wants more of our money. The President is saying that Social Security, the military and the veterans won’t be paid (notice he never says that he and Congress won’t get paid), and the Republicans say they are not raising the debt ceiling until someone shows some fiscal restraint. Good luck with that.

Heritage.org posted an article this morning that does actually shed a little light on what is actually at stake underneath all the rhetoric.

The article at Heritage.org reminds us:

“Suggesting that the United States might default on its debt is factually wrong and shameful behavior on the President’s part,” Heritage’s J.D. Foster, the Norman B. Ture Senior Fellow in the Economics of Fiscal Policy, said yesterday.

The U.S. is not going to default on its interest payments, Foster said, and “this assurance rests not on congressional action to raise the debt ceiling, but on the simple fact that the Treasury has far more than enough funds to pay all interest as it comes due.”

The President stated that raising the debt ceiling was not an increase of spending but simply the paying money due from past spending. He compared the Republicans in Congress to someone who eats dinner and refuses to pay the check. Just for the record, the Republicans did not support much of the spending he is referring to. The excessive spending is due to the fact that the Senate has not passed a budget since 2009 and is using the bloated baseline of the 2009 Budget (when the Democrats controlled the House of Representatives) in continuing resolutions. Since the Senate has not passed a budget, there has been no serious Congressional debate on cutting spending since 2009. The President is essentially asking the Republicans to pay for the Democrats dinner!

At any rate, default is not an issue–it is a red herring. I suspect that if the President and Congress were not going to get paid until a deal was worked out, we would have a deal rather quickly. Stay tuned. It might not be a bad idea to get out the popcorn!Enhanced by Zemanta

The Coming Age Of Fiscal Sanity

Michael Barone posted an article in the Washington Examiner on Saturday entitled, “History suggests that era of entitlements is nearly over.” Wow. Is that a promise? Mr. Barone points out that you can actually divide American history in 76-year periods.

The article points out:

It was 76 years from Washington’s First Inaugural in 1789 to Lincoln’s Second Inaugural in 1865. It was 76 years from the surrender at Appomattox Courthouse in 1865 to the attack at Pearl Harbor in 1941.

Going backward, it was 76 years from the First Inaugural in 1789 to the Treaty of Utrecht in 1713, which settled one of the British-French colonial wars. And going 76 years back from Utrecht takes you to 1637, when the Virginia and Massachusetts Bay colonies were just getting organized.

The article points out that the reason for change in each 76-year cycle was that the original arrangement became unworkable. We are now more than 76 years away from the passage of the Social Security in 1935. The entitlement society is in the process of going broke, and people are beginning to look for alternatives to big government programs. It will be interesting to see what happens next.

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Borrowed From A Friend On Facebook

Alan Simpson, the Senator from Wyoming calls senior citizens the Greediest Generation as he compared “Social Security ” to a Milk Cow with 310 million teats. Here’s a response in a letter from PATTY MYERS in Montana … I think she is a little ticked off! She also tells it like it is! This goes for both the Democrats and the Republicans and is right on the money!!! (so to speak)
————————————

“Hey Alan, let’s get a few things straight!!!!!

1. As a career politician, you have been on the public dole (teat) for FIFTY YEARS.

2. I have been paying Social Security taxes for 48 YEARS (since I was 15 years old. I am now 63).

3. My Social Security payments, and those of millions of other Americans, were safely tucked away in an interest bearing account for decades until you political pukes decided to raid the account and give OUR money to a bunch of zero losers in return for votes, thus bankrupting the system and turning Social Security into a Ponzi scheme that would make Bernie Madoff proud.

4. Recently, just like Lucy & Charlie Brown, you and “your ilk” pulled the proverbial football away from millions of American seniors nearing retirement and moved the goalposts for full retirement from age 65 to age, 67. NOW, you and your “shill commission” are proposing to move the goalposts YET AGAIN.

5. I, and millions of other Americans, have been paying into Medicare from Day One, and now “you morons” propose to change the rules of the game. Why? Because “you idiots” mismanaged other parts of the economy to such an extent that you need to steal our money from Medicare to pay the bills.

6. I, and millions of other Americans, have been paying income taxes our entire lives, and now you propose to increase our taxes yet again. Why? Because you “incompetent b*******s” spent our money so profligately that you just kept on spending even after you ran out of money. Now, you come to the American taxpayers and say you need more to pay off YOUR debt. To add insult to injury, you label us “greedy” for calling “bulls***t” to your incompetence. Well, Captain Bulls***t, I have a few questions for YOU:

1. How much money have you earned from the American taxpayers during your pathetic 50-year political career?

2. At what age did you retire from your pathetic political career, and how much are you receiving in annual retirement benefits from the American taxpayers?

3. How much do you pay for YOUR government provided health insurance?

4. What cuts in YOUR retirement and healthcare benefits are you proposing in your disgusting deficit reduction proposal, or as usual, have you exempted yourself and your political cronies?
It is you, Captain Bulls***t, and your political co-conspirators called Congress who are the “greedy” ones. It is you and your fellow nutcase thieves who have bankrupted America and stolen the American dream from millions of loyal, patriotic taxpayers.
And for what? Votes and your job and retirement security at our expense, you lunk-headed, leech.

That’s right, sir. You and yours have bankrupted America for the sole purpose of advancing your pathetic, political careers. You know it, we know it, and you know that we know it.

And you can take that to the bank, you miserable son of a b****h. NO, I did not stutter.

EVERYONE!!!

If you like the way things are in America delete this.

If you agree with what a Montana citizen, Patty Myers, says, please PASS IT ON!!!!

P.S. And stop calling Social Security benefits “entitlements”. WHAT AN INSULT!!!!

I have been paying in to the SS system for 45 years “It’s my money” – give it back to me the way the system was designed and stop patting yourself on the back like you are being generous by doling out these monthly checks!”

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A Concise, Honest Statement About The Fiscal Cliff

Yesterday Real Clear Politics posted a video and transcript of a statement made by Senator Tom Coburn on Face the Nation.

This is the statement:

SEN. TOM COBURN (R-OKLAHOMA): The characterization is no matter where we raise taxes, what’s going to happen wit the money? We’re going to grow the government with it. We’re not going to reduce the deficit, because we refused to solve the bigger problems like saving Medicare, insuring Social Security Disability (SSI). We’re not going to use that money to do anything except continue to grow the government.

So, the characterization is that we’re wanting to protect — what we’re wanting to do is to make sure we have a dynamic economy. And I have no problems, I’ve been out there for a long time with saying those who are making more ought to contribute more, but where does that money go? And what do you do with the money? Do you do something with the money that will actually get us further down the road and fix our ultimate long-term problem, which is we’re bankrupt? And we went off the cliff two years ago when we covered 90% of our debt-to-GDP? And by the way, if you actually look at it the way every other country [does], our debt-to-GDP right now is 120%. Not 90%, not 100%, it’s 120%.

So, if you look at that, what’s ultimately going to happen — one last fact, the average Greek citizen‘s debt, for their country, is $36,000; we’re at $51,000 per person in this country. We’re becoming Greece, and we have a government where we’re willing to pay the taxes for 65% of the cost of it. We need to change that. We need both, we need to do both.

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A Broken Promise

I seem to remember both Republicans and Democrats saying that they did not want to raise taxes on the Middle Class. Then how come, even if a deal is reached to avoid the fiscal cliff, taxes on the Middle Class are going up in January?

The Washington Free Beacon posted an article today explaining what is about to happen:

Employee payroll taxes are scheduled to rise nearly 50 percent in 2013 absent action by lawmakers, and there is a growing sense that both parties might be willing to let that happen.

Party leaders have about five weeks to resolve a host of budget issues to avoid going over the “fiscal cliff,” the term used to describe more than $600 billion in automatic spending cuts and tax increases scheduled to occur on Jan. 1, 2013.

The discussion thus far has focused on the Bush-era tax cuts, with very little discussion of what to do with the temporary cuts on employee payroll taxes that has been in effect for the past two years. The employee payroll tax cut affects roughly 160 million Americans and saves the typical middle class family $1,000 per year.

U. S. News posted an article in January 2012 which listed five facts about the employee payroll tax cut. One of these is very interesting:

Even though workers are paying less tax into the Social Security system, they do not suffer any reduction in the benefits that will ultimately be collected. The federal government promises to pay the benefit that would otherwise have been received. The benefits are figured on the basis of earnings (up to the wage base limit for the year) and not on the taxes paid.

So Congress took a program (Social Security) that has been teetering on bankruptcy for a number of years and reduced the amount of money paid into it without reducing the benefits being paid out. What a business plan!

The article at the Washington Free Beacon concludes:

There is some concern among Republicans that Democrats might disregard policy considerations in order use the payroll tax cut as a political wedge issue. Democrats did this in February when House Republicans arguably lost a showdown with the White House.

It remains to be seen whether or not lawmakers can strike a deal to avoid going over the fiscal cliff.

Either way, though, the payroll tax cut appears unlikely to survive.

Obamacare increases taxes on the Middle Class in January. It is likely that even if a deal is reached to avoid the fiscal cliff, other taxes on the Middle Class will be increased in January also. As Americans, we need to tell Washington–THE PROBLEM IS NOT A LACK OF REVENUE–IT IS TOO MUCH SPENDING!!! Until Congress and the President get that message, the American taxpayer will continue to be seen as a never ending source of money, and at some point the American taxpayer will run out of money.

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Welfare Spending In America

The Heritage Foundation posted the following chart in October in an article about Paul Ryan‘s plan to reform welfare:

The article reports:

Tragically, this massive welfare state has been a driver of dependency. Today, 100 million Americans—roughly one-third of the U.S. population—receive aid from a government welfare program (not including Social Security, Medicare, or unemployment insurance).

As Ryan noted, in the 1990s Congress passed the historic welfare reform law, inserting work requirements into the largest federal cash assistance program. This was a huge success.

“[W]e saw welfare enrollment drop dramatically, as millions of our fellow citizens gained new lives of independence,” Ryan said. “We saw child poverty rates fall over 20 percent in four years—and we saw employment for single mothers rise.”

But these reforms are at risk. In July of this year, the Obama Administration announced it would remove work requirements from welfare reform—the very element that made the law such a success.

At what point will this kind of institutionalized dependency result in the loss of America as we know it?

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Can Cold Hard Facts Beat Out Name Calling ?

This week on Fox News Sunday DNC Chair Debbie Wasserman Schultz provided a preview of the attack aimed at the Romney-Ryan ticket. She repeatedly called Paul Ryan‘s budget proposals extreme (while conveniently not mentioning that it has been more than three years since the Democrats made a serious budget proposal) and stated that reducing spending by any significant amount would harm the fragile recovery. (Recovery???)That is the preview of what is to come.

Michael Barone posted an article at the Washington Examiner today explaining that the choice of Paul Ryan as the Vice Presidential candidate puts the entitlement crisis at the center of the presidential campaign. At this point I would like to state that Social Security is not an entitlement–the people who will be collecting Social Security from this point on have paid more into the program than they will get out. The problem is not Social Security–it is the fact that since the mid 1960’s, Congress has spent the money that was supposed to be set aside for Social Security on other things. However, Medicaid and Medicare spending has increased so dramatically above what was originally projected, that there is no way to cover the rising costs without major modifications to the programs. Social Security also needs to be modified, but again, I resent calling it an entitlement when I was forced to pay into it my entire working life.

Michael Barone’s article concludes:

For Ryan and Romney can make the point — lost in the shuffle when this is a low-visibility issue — that their plan leaves the current Medicare system in place for current recipients and those over 55. Those who have made plans based on the present program can continue to rely on it.

But they can also make the point that their reforms are necessary in order to make sure Medicare is sustainable in the long run. Polls show that many voters under 55 doubt that they’ll ever get the Medicare and Social Security benefits they’ve been promised.

One more thing about Ryan, I think, appealed to Romney. He has already shown he cannot be intimidated by the most eminent opponent. Watch the video of Ryan’s five-minute evisceration of Obamacare at the president’s Blair House meeting. You can tell that Obama didn’t like it one bit.

He better get used to it. Obama’s side is relying on trash-talking ads. Romney’s selection of Ryan shows he wants a debate on whether America should follow Obama on the road to a European-style welfare state.

Make up some popcorn, there is going to be a show!

 

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A Ponzi Scheme Works As Long As There Are New People Getting In

Today’s Wall Street Journal posted an article about the 1,400 union-run retirement plans that are poorly run and underfunded.

The article reports:

…Multi-employer plans in the U.S. are underfunded by some $369 billion. An estimated $43 billion of that off-balance-sheet liability belongs to the 44 S&P 500 companies that are exposed to multi-employer plans. The other 88% of the $369 billion is borne by small, mid-cap or private firms that may be even less prepared to cover the obligations. The report says Safeway’s $6.9 billion in liabilities amount to 76% of the company’s market cap, for example.

The article points out that CEO’s and union chiefs have ignored the problem, preferring to invest in current wages and benefits rather than funding pensions. If these unfunded pensions are dumped into the Pension Guaranty Fund, the people expecting the pensions will receive a maximum of $12,800 a year–the maximum payout of the fund.

In June 2010 I posted an article (rightwinggranny.com) about the coming crisis in union retirement plans. When you consider the amount of money the unions spend on political causes, you would think they might have some they could invest to make sure their workers actually receive the benefits promised them. Right now, union pensions are a ponzi scheme (just like Social Security). That will not change until union members realize what is going on and force a change.

Just for the record, the website Open Secrets is reporting that labor PACS have contributed $28,047,761 to political campaigns this year (figures as of April 30, 2012). Of those contributions, 88% went to Democrats and 12% to Republicans.

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Inventing Terms To Circumvent The Law

On Monday, Judicial Watch reported that the Department of Homeland Security (DHS) will grant “unlawful presence waivers” to illegal aliens who can prove they have a relative that’s a U.S. citizen. What the @#$# is an “unlawful presence waiver?”

The new procedure is wrapped up in legal terms, but basically it means that illegals would not be required to return to their home countries and wait in line to enter the country legally.

There are a few things I would like to mention here. What part of illegal does the DHS not understand? The other thing I need to point out is the dirty little secret regarding making illegals legal and putting them into the work force.

In the 1960’s, money from the Social Security Taxes was raided and put in with other tax money and spent in the general fund. There has not been a separate Social Security tax ‘lockbox’ for at least forty-five years–the money was used to pay for President Johnson’s expanding social programs. Until the baby boomers began to retire, that was not a problem as there were so many boomers that the Social Security taxes they paid kept the program solvent. Well, that was then, this is now. Our population is aging and the boomers started retiring a few years ago. Because of the impact abortion has had on the growth of population (since 1973–almost thirty years ago), there are not enough workers in the workforce to pay Social Security for the boomers. If there is a sudden increase of workers paying into Social Security (such as illegals suddenly becoming legal and paying Social Security Taxes), the demise of Social Security could be kicked down the road until the President is out of office and most of the present Congress is no longer in office. That way, no unpopular steps need be taken to fix the program and federal spending in general might not have to be cut.

Illegals are illegal. It’s a rather basic concept. It may not be practical to send all illegals home, but we should begin to deport those who break our laws and we should secure our borders. The porous southern border is a security risk. Having no idea who is in the country because we have no idea who has entered the country is a recipe for disaster. Do we think for one minute that those who wish us harm who have set up terrorist camps in South and Central America are not taking advantage of our porous southern border?

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Just For The Record

Social Security and Medicare are not entitlement programs! Those of us who are retirement age or rapidly approaching retirement age have been paying into Social Security since we first began working and Medicare since it was enacted. How much money has the average welfare recipient paid into welfare? What has the government done with the money we have paid into those programs over the years?

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Why It Is So Difficult To Get Government Spending Under Control

Yesterday Big Government posted an article about part of the deal that allowed the payroll tax holiday to continue for the year. One way to offset the cost was to increase the amount of money federal employees pay toward their pensions by .08%. First of all, the concept is false. The money that will not be taken out of your paycheck this year was supposed to go toward the non-existent ‘Social Security Fund’–not the general fund. All the payroll tax holiday is doing is hastening the demise of Social Security.

Meanwhile, the article at Big Government quotes the union leader’s reaction:

 “Working class men and women who have dedicated their lives to serve their country should not be on the hook for solving a crisis they did not create,” American Federation of Government Employees National President John Gage said.

[…]

Continuing to attack federal employees’ pay and benefits doesn’t create new jobs and only adds to the pain and suffering many working class men and women are experiencing,” Gage said.

For the moment I am going to ignore the fact that federal workers make double what their counterparts in private industry make (USA Today 8/13/2010) and focus on exactly what the .08% means in actual dollars. If you, as a federal worker, were currently contributing $100 to your pension plan, you are now required to contribute $100.80. That small amount will save the government about $15 billion.

I don’t think 80 cents is an attack on working class men and women. If they are so unhappy with paying the 80 cents, maybe they should try to get a job in the private sector.

 

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What We Didn’t Know About The Senate Payroll Tax Extension Bill

Fox News posted a story yesterday about exactly what was in the payroll tax extension bill passed by the Senate. It seems that the bill that the Senate passed was unworkable.

The article reports:

The Senate bill did not cleanly extend the current Social Security employee share of 4.2 percent for two months. Instead, it created a two-tiered payroll tax with a rate of 4.2 percent for the first $18,350 of income in those 60 days, with a 6.2 percent rate above that.

This establishment of multiple rates of payroll tax presents serious logistical challenges for payroll processors. In fact, the National Payroll Reporting Consortium strongly opposed to the Senate bill based on this feature, writing:

“The difficulty is in establishing a new Social Security Taxable Wage limit of $18,350 for the two-month extension period. More than ten percent of the workforce is likely to meet that limit, and would be subject to the higher 6.2% tax rate for earnings over that amount. However, many payroll systems are not likely to be able to make such a substantial programming change before January or even February. The systems affected tend to be highly complex, normally requiring at least ninety days for a change of this magnitude for software testing alone; not to mention analysis, design, coding and implementation.”

To me, that explains why the Senate did not simply pass the House version of the payroll tax extension–they were using the bill as an instrument of class warfare.

Please follow the link above to read the entire article. It explains the actual process that resulted in a workable bill being passed. This bill was a victory for the taxpayers and for the companies having to deal with payrolls. It was a small victory, but it was a victory.

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Received In My E-Mail This Morning

This article was also published in the Worcester Telegram and Gazette this morning. It was also sent out by the author, Len Mead. I received it in my e-mail this morning.

The economic truth hurts

Did you think Republicans would “raise your payroll taxes” starting in January if no deal had been reached? Do you think unemployment just dropped to only 8.6 percent?

If you answered “yes” to these questions, the Main Street media has succeeded in deceiving you — and most other busy readers and viewers. Like our economy, truthful journalism has sunk to lows unseen in our lifetimes.

Fortunately, dear reader, you have me to help you correct these misconceptions. Let me guide you — through truth — to understand what’s really happening as we celebrate what blessings we have left this Christmas and Hanukkah.

Let’s start with the bogus “payroll tax reduction” issue. You’ve been told if the current reduced amount isn’t “extended,” 140 million plus workers will have taxes raised over $1,000 next year. The truth is this payroll withholding is simply not a tax. It is an amount fortunate working people have set aside for their own retirement to fund Social Security.

So, when it was “cut” last year, it just further short-changed funding for promised Social Security payments which, not surprisingly, were insufficient to cover pay-outs last year for the first time in history.

The truth is that payroll withholdings for Social Security was never a tax, and it never should have been reduced, because now 40 cents of each federal dollar paid to existing Social Security retirees has to be borrowed.

When you buy groceries, do you borrow 40 cents of each dollar for food? That’s the truthful state our current retirement system has fallen to.

Real tax cuts are federal income tax rate reductions implemented by presidents like John Kennedy, Ronald Reagan and George Bush.

These real tax rate reductions all resulted in sharply higher tax revenues collected by the government due to a growing economy, with more jobs and more people being hired to pay taxes.

One could argue that the so-called payroll tax cut reduction implemented in the past was an intentional destabilizing effort by Democrats to make citizens further dependent on government — similar to now bankrupt Europe. But hey, we’re bankrupt, too, with a national debt topping — hold your breath — $15 trillion (see usdebtclock.org). Not ready to pay this debt bill? Well, surely your children and grandchildren are, eh?

The Main Street media is criminally negligent in not reporting this serious truth to us.

Moving on to the bogus reported “reduction” in unemployment: Folks, it just ain’t so.

True unemployment is rising — horribly. The “official unemployment rate” of 8.6 percent reported by the Bureau of Labor Statistics does not include desperate citizens who have given up looking for full-time work after months or years of failure. For example, if the same number of people were looking for work today as were looking for work when Barack Obama took office, the unemployment rate would be 11 percent.

But the true unemployment figure is even worse.

The more accurate Labor Department unemployment figure is not the “U-3” 8.6 percent figure but really 15.6 percent, which includes “total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force.”

Estimates of the number of unemployed by this measure exceed 25 million desperate people in the U.S. out of about 153 million working. Again, the Main Street media seems criminally unwilling to report this truth to us, or to report the possible solutions for improving our economy and thus the number of available jobs people wanting to work could seek.

Fortunately, many sources for these truths exist for curious, open-minded citizens anxious for real solutions to the problems of our economy.

Solutions include real reductions in government spending and regulations, lower and certain taxes for the future, and the repeal of Obamacare, which is a cancer on businesses who simply cannot hire anybody without knowing what future real costs will exist with each new hire.

When these steps are taken, our great free economy will again explode upward — with new jobs, new tax revenues for public needs, and real new hope for the future. Our still-free republic is still our greatest blessing now at year’s end.

Len Mead can be reached at mead1720@gmail.com

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What Was In That Bill ?

Yesterday the Daily Caller posted a summary of the payroll tax cut bill that recently caused so much hand wringing in Congress. The bill that was passed was pretty much what was suggested at the beginning of the negotiations (except for the two-month limit).

The Daily Caller reports:

—Retains through Feb. 29 the current 4.2 percent rate for Social Security payroll taxes paid by 160 million workers, instead of letting the rate rise to 6.2 percent on Jan. 1.

—Renews federal benefits averaging $300 a week for the long-term unemployed through Feb. 29.

—Prevents 27 percent cut in Medicare payments to doctors; extends other health care fees through Feb. 29.

—Requires President Barack Obama to approve construction of the Keystone XL oil pipeline from Canada to Texas within 60 days unless he declares the project would not serve the national interest.

—Price tag of $33 billion. Paid for by increasing home loan guarantee fees charged to mortgage lenders by Fannie Mae, Freddie Mac and the Federal Housing Administration by one-tenth of 1 percentage point. The fee is passed on to home buyers and will apply to many new purchases and refinancings starting Jan. 1. For a $200,000 mortgage, the fee increases a borrower’s cost by about $17 a month.

—Requires House and Senate leaders in both parties to name negotiators to work on a bill extending the payroll tax cut for a year, extend federal jobless benefits for the long-term unemployed and keep Medicare payments to doctors at their current level.

I guess I am wondering why we need a committee to extend the bill for a year. The gang of twelve didn’t work out too well, so why are we doing this again?

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Taking Advantage Of An Uninformed Electorate

 Charles Krauthammer posted an article today at National Review about the bill passed yesterday in Congress allowing a 60-day tax break for Americans. First of all, it is not a tax break–it is a raid on Social Security at a time when Social Security can least afford to be raided. Second of all, no sane government sets a two-month tax policy.

The Republicans had the right argument on principle–the tax cut needed to be for the full year, but they lost on the politics. The reason they lost on the politics is that most Americans were paying more attention to their Christmas shopping than to what was actually happening in Congress, and when the media (and the Democrats) told them that the Republicans were holding up their tax break, they believed it.

Dr. Krauthammer states:

To begin with, what even minimally rational government enacts payroll-tax relief for just two months? As a matter of practicality alone, it makes no sense. The National Payroll Reporting Consortium, representing those who process paychecks, said of the two-month extension passed by the Senate just days before the new year: “There is insufficient lead time to accommodate the proposal,” because “many payroll systems are not likely to be able to make such a substantial programming change before January or even February,” thereby “creat[ing] substantial problems, confusion and costs.”

He further states:

The House Republicans’ initial rejection of this two-month extension was therefore correct on principle and on policy. But this was absolutely the wrong place, the wrong time, to plant the flag. Once Senate Republicans overwhelmingly backed the temporary extension, that part of the fight was lost. Opposing it became kamikaze politics.

The responsibility for this debaucle ultimately rests with the American people (and the fact that the media was failing to report both sides of the story). If we have truly reached a point in our history when we are tired of politics as usual, then we need to be willing to do something about it. We need to pay enough attention so that politics cannot trump good policy. Until that happens, we will get more of the same.

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In Washington Things Are Never As They Appear To Be

 

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Tampa Bay Online is reporting today that the House of Representatives has voted 229-193 to reject the Senate’s proposal for a two-month extension of the payroll tax cut. 

The article reports:

The House vote, 229-193, kicks the measure back to the Senate, where the bipartisan two-month measure passed on Saturday by a sweeping 89-10 vote. The Senate then promptly left Washington for the holidays. Senate Majority Leader Harry Reid, D-Nev., says he won’t allow bargaining until the House approves the Senate’s short-term measure.

OK. Let’s take a look at this. The Republicans in the Senate need to be taken to the woodshed on this one. First of all, a two-month extension of a tax policy is totally ridiculous. Companies need time to program their payroll software, they need some certainty in the future to allow them to plan expenses. The Republicans in the Senate fell right into the hands of the Democrat politicians on this one. Harry Reid left town in order to avoid negotiations. He knew that the House would reject this bill–this is the Democrat way of avoiding the Keystone Pipeline and blaming the Republicans for the middle class tax increase that is coming.

There will be no payroll tax cut extension. In itself, that is not horrible. (Don’t panic. I am not for higher taxes, I just don’t like the way this was done). The payroll tax cut comes out of the “Social Security Fund” (which is nonexistent)–not the general fund. The payroll tax cut ensures the demise of Social Security sooner rather than later. Raising taxes on millionaires, increasing the cost of mortgages, etc., has no impact on the money not collected because of the payroll tax cut–those things impace the general fund–not the social security fund.

Unfortunately, this battle is totally about politics and the American people are the losers. The correct answer to the entire situation would have been for Congress to pass a real budget–which it has not done for almost three years and proceed from there.

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Something To Watch In The Next Week

This article is based on two stories–one from The Hill on Friday and one from Power LIne today. Both stories deal with legislation drafted by House Republicans regarding the F.I.C.A. tax holiday extension requested by the President, the extension of unemployment insurance, and the delay of changes to the Medicare  reimbursement rate for doctors. The House Rules Committee has scheduled a hearing on the legislation for Monday. This is the legislation that President Obama says has to be passed before he will go on Christmas vacation.

The problem with the bill, as President Obama and the Democrats see it, is the inclusion of a provision that directs the executive branch to approve the Keystone pipeline within 60 days, or else report the reasons to Congress. The details of the President’s previous actions regarding the Keystone Pipeline are detailed in a rightwinggranny article of November 10. For the President, the pipeline represents a dilemma–unions support it (it will create a huge number of union jobs) and environmentalist oppose it (it produces carbon-based domestic energy–that is not their stated reason, but that is the reason). To act on the pipeline before the November election is going to alienate one of those two groups.

John Hinderaker at Power LIne comments:

But there are a number of other significant provisions in the House bill. It would strip Obamacare of $34.9 billion in implementation funding; extend unemployment benefits while gradually reducing the time for which they can be claimed; delay implementation of the EPA’s new boiler and incinerator regulations; freeze pay for federal employees; and more. Some of the provisions are a little silly, like barring millionaires from receiving unemployment insurance and food stamps. But on the whole it is a good package.

For people trying to shrink government spending and create jobs, it’s a good bill. Politically for the Democrats, it’s a poison pill. Unfortunately this bill does nothing to create peace and harmony in Washington, so prepare to hear a lot of name calling on the Sunday news shows this weekend and in the mainstream media during the coming week.

The article at Power Line concludes:

But there is something more serious going on as well. If the payroll tax holiday extension passes–and both parties are now on record as favoring it–the dam will have been breached, and Social Security will be massively insolvent, not at some point in the future, but today. Many liberals have argued–I think correctly–that this is a decisive step that will probably doom the program in anything like its present form. Inevitably, with revenues grossly inadequate to pay benefits to all retirees, Social Security will be means tested. In other words, it will become a welfare program that provides a safety net to the indigent elderly. Will today’s young workers be willing to pay for forty years into a program from which they anticipate that they will get no benefit when they retire–unless, of course, they are planning on being indigent? No way. The consensus that has sustained Social Security will be broken, and the program will be just as popular as other welfare programs; which is to say, not very popular at all. It will be the beginning of the end of the welfare state as we now know it. (That trend, by the way, is prefigured in another feature of the House Republican bill, which would begin the means testing of Medicare.)

The Democrat Party likes the issue of extending the F.I.C.A tax holiday because if the Republicans oppose it, it looks as if the Republicans support raising taxes on the middle class while protecting ‘the rich.’ The fact that extending the F.I.C.A. tax holiday puts Social Security at greater risk and really does not significantly stimulate the economy does not really enter into the political discussion of the issue.

The root of the problem in passing this bill is not the bill or the additions to the bill–the root of the problem is that there is an election in November of next year. Unfortunately we have a bunch of career politicians on both sides of the aisle who are willing to put their re-election ahead of the good of the country. We need the Keystone Pipeline project to go forward for national security and economic reasons, and we need a middle class tax cut (although not out of the ‘Social Security Fund’, which in reality does not exist). It would be nice to see both sides work together for a change.

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When Is A Tax Cut Not A Tax Cut ?

President Obama and the Democrat party are currently complaining that the Republicans really do not support tax cuts for the middle class because the Republicans are not supporting the extension of the payroll tax cut. That may be good for the campaign trail, but it really doesn’t tell the whole story.

On Sunday, the Business Insider posted the following:

Sen. Jon Kyl (R-AZ), the retiring minority whip, said he is opposed to extending the payroll tax cut — raising taxes an average of $1000 on American families and risking eliminating half-a-million jobs from the economy — because he is concerned about the longevity of Social Security.

“The problem here is payroll doesn’t go into general revenue, it supports Social Security, and you can’t keep extending the payroll tax holiday and have a secure Social Security,” he said on Fox News Sunday.

The problem with the cutting the payroll tax is that you are taking money directly out of Social Security, which is already in financial trouble. The government has gotten into the habit of manipulating Americans through tax policy–if you do this, you get a tax break, if you do that, we tax you extra. The payroll tax gives Americans the sense that they are getting something back, without explaining that they are helping destroy the future viability of Social Security. Again–the problem isn’t taxes–it’s spending, and until we deal with the spending (and excessive government regulations), the economy will not recover.

As much as I would love to have extra money in my pocket to spend, extending the payroll tax cut is a bad idea.

 

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What Happens If You Opt Out Of Social Security ?

Merrill Matthews at the Wall Street Journal posted an article on Saturday detailing what has happened to three Texas counties that opted out of Social Security thirty years ago.

The article reports:

…Now, 30 years on, county workers in those three jurisdictions retire with more money and have better death and disability supplemental benefits. And those three counties—unlike almost all others in the United States—face no long-term unfunded pension liabilities.

Since 1981 and 1982, workers in Galveston, Matagorda and Brazoria Counties have seen their retirement savings grow every year, even during the Great Recession. The so-called Alternate Plan of these three counties doesn’t follow the traditional defined-benefit or defined-contribution model. Employee and employer contributions are actively managed by a financial planner—in this case, First Financial Benefits, Inc., of Houston, which originated the plan in 1980 and has managed it since its adoption. I call it a “banking model.”

If the states are laboratories for the federal government, I think we just had a successful test in the laboratory.

The article further points out:

If a worker participating in Social Security dies before retirement, he loses his contribution (though part of that money might go to surviving children or a spouse who didn’t work). But a worker in the Alternate Plan owns his account, so the entire account belongs to his estate. There is also a disability benefit that pays immediately upon injury, rather than waiting six months plus other restrictions, as under Social Security.

The concept here is that the money invested belongs to the person–not the government–that’s why the plan works!

The article also mentions:

The Alternate Plan could be adopted today by the six million public employees in the U.S.—roughly 25% of the total—who are part of state and local government retirement plans that are outside of Social Security (and are facing serious unfunded liability problems). Unfortunately this option is available only to those six million public employees, since in 1983 Congress barred all others from leaving Social Security. 

Congress has been spending Social Security payroll deductions on other things. That is part of the problem. It is time to take the money out of the hands of Congress and give it back to the people it belongs to.

Maybe Rick Perry knows what he is talking about when it comes to Social Security–opting out of Social Security has worked in Texas!

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