FedUpUSA

The following is making the rounds on Facebook:

My reply, which incidentally is all easily-verified, was thus:

No you didn’t. 

You were conned. 

You paid a tax, nothing more. 

This has been ruled on by the US Supreme Court.

That is the same Supreme Court that liberals believe has the right to ban guns (any or all), starting with the NFA and onward through Miller and more. 

It is the same US Supreme Court that the liberals say was correct in endorsing Obamacare. 

The problem is that the US Supreme Court ITSELF is a con; in Marbury .v. Madison they ARROGATED the right to change the Constitution to themselves, but no such power was ever delegated to them IN the Constitution or by Amendment thereof. 

All of those acts by the US Supreme Court are thus unlawful, and those that impugn fundamental liberty interests are openly seditious. 

But…. you believe in that court, so go take the issue up with them, SINCE THEY HAVE RULED YOUR SO-CALLED “PAYMENTS” NOTHING MORE THAN A TAX.

You can’t have this one both ways folks…..

In the duh department we have this:

The actual liabilities of the federal government—including Social Security, Medicare, and federal employees’ future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion. Nothing like that figure is used in calculating the deficit. In reality, the reported budget deficit is less than one-fifth of the more accurate figure.

Did you get that?

The entire economy is $15 trillion.

The accrued expense of Medicare and Social Security alone — and most of it is Medicare — is half the economy each and every year.  Put that in your head and consider that this would mean that just to keep even we would have to more than triple the existing amount of tax collected, raising total taxation to more than 60% of the economy!

If you have read Leverage you know that one of the pieces that I pound on hard is the medical cost explosion.  I’ve also written about it extensively here in these pages.  This is why — it is simply impossible for the promises made through Medicare to be kept.  That is not conjecture, it is not able to be fixed with taxation, it is not a matter of opinion.

It is mathematical fact.

You’re not going to get Medicare, unless (1) you’re getting it now and (2) you’re reasonably close to death.  For everyone else what you have been promised and what you’re going to get are very different, and there is exactly nothing you can do about it.

There is also no “gradual” way to deal with it.

It never ceases to amaze me how people get “column inches” in a paper like the NYT peddling nonsense like this gent is doing.  Oh wait; it’s not that hard to figure out – the media is not about reporting or even opinion, it’s about shaping opinion — and the truth, even arithmetic, be damned.

WE have two political parties in America, runs a saying that conservatives like to quote. One is stupid, the other is evil. And when they join forces to do something that’s both stupid and evil — well, that’s what we call “bipartisanship.”

The payroll tax holiday that passed Congress in the winter of 2010 was a rare exception to this pessimistic rule. Cutting the payroll tax was good short-term politics for both Democrats and Republicans: it was a tax cut that liberals hoped would double as stimulus, and a boost to the middle class that conservatives could support without embracing new federal spending. But more important, it opened the door to what would be good long-term policy as well — because more than almost any feature of the American tax code, the payroll tax deserves to be pared away into extinction.

Ross goes on to do what so many other so-called “populist” commentators do — he conflates the two components of the payroll tax and then talks about getting rid of one of them.

That’s intentionally dishonest and Ross knows it.

The Payroll Tax has two components, both of which are intentionally designed so that you, the employee, only “see” half of them.  Both halves, however, come directly out of your wages even though employers are forbidden by federal law to itemize the second half (the “employer contribution”) and show it to you on a pay stub as a deduction off what you would otherwise be paid.

Social Security has a number of very serious and I would argue intentional design features that are both racist and sexist.  For example, a black man is expected to live to be 70.8 years, while a white woman is expected to live to 81.2 years.  If we presume an equal retirement age of 65 (which the Social Security system does for equal benefits, assuming equal earnings history) the black man will collect benefits for 5.8 years, while the white woman will collect them for 16.2 years, or 279% of the black man’s Social Security payments.  Note that a large percentage of the difference is found in things that kill black men before they reach 65; those people get exactly nothing.

All paid in, however, the exact same amount of money.

That’s racist and sexist — and intentional.  Those who pay in and get nothing wind up being the net “suckers”; they have no choice but to pay, but they get zero since their payments do not have their name on them – they’re just a tax.

In addition Social Security is “progressive” in that the amount of benefit you get from further contributions once you reach the minimum requirement is less, on a ratable basis, than what you paid in.  That is, the lower-income person gets a larger benefit in proportion to their paid-in capital than the higher-income does.  Further, the FICA cap and payout cap means that beyond a certain level of contribution, which is reasonably modest and occurs in the middle class income band, you get nothing further at all.  Of course you pay nothing more either, so that, I suppose, is “fair.”

Nonetheless Social Security is fixable without a lot of drama, although we certainly should talk about whether the program should exist at all, or whether it should exist in its present form.  The reality is that the payroll tax has become a convenient slush fund from which the government steals, and which causes the reported deficit to be smaller than it really is.  It was responsible for Clinton’s so-called “Surplus”, which in fact never happened — he simply stole the amounts paid in from the payroll tax that were not immediately disbursed as benefits!  Every President since Ronald Reagan has done the same.

To fix Social Security removing the payroll tax abatement is required, as is indexing the full benefit retirement age to longevity.  If we want to fix the sexist and racist elements as well, we could index the retirement age by race and gender; this would work because the persons with the lower life expectancy would also pay in for fewer years and likely would have lower benefits, but they would last for the same average amount of time as does someone who is of a longer-lived race and/or gender.  This could be adjusted on a five-year sliding scale to account for changes in demographics.

The real problem with the payroll tax is found in Medicare.  The Federal Government went from spending $53 billion on all medical services in 1980 to about $850 billion last year.  The average retiree gets between three and five dollars out from every dollar they “contributed” during their working years.  To put this in perspective the payroll tax is 3.8% for Medicare (both halves) and if we look at the average working wage of about $50,054 (all workers, all races, US Census Bureau) then the payroll tax for Medicare is $1,902 annually (both halves.)  Over a 45 year working life this amounts to $85,592.34.

How long does this amount of money last? 

The fact is that the average expense that Medicare puts forward for a given retiree is close to $300,000!

There is simply no way to make the books balance given these facts; to make the books balance either benefits must be cut by more than two thirds or the 3.8% Medicare tax must more than triple.

This has been hidden intentionally from the public debate on entitlements because both Democrats and Republicans know what the figures say, and they also know there are only three choices when it comes to solving this problem:

• Triple the Medicare tax to approximately 12%, 6% each for employer and employee with no earnings cap.  Incidentally, this is only the forwardcomponent for retirement; you still have medical costs during your working years, insured or not!
• Dramatically curtail Medicare benefits — by a literal 2/3rds or more.  That’s not going to be popular, but it’s what is inevitably coming if we don’t solve this, because the law does not permit Medicare to go into negative balances, and by the end of the decade it will.

• Break the medical industry’s monopoly-style pricing and controls.  Up and down the line, from drugs to devices to “CON” laws and more.  In short, make the entire industry from insurance to providers to hospitals to doctors accountable under Sherman, Clayton, Robinson-Patman and first-sale doctrines, along with removing all shields that prevent them from being attacked under Racketeering and similar statutes for any element of price-fixing or other anti-competitive behavior.  This would cause prices to collapse by 75% or more, and suddenly the problem goes away.

#3 is the only way that can work in the long term.  But #3 causes an instant deep recession or worse, as the short-term impact of removing that spending from GDP will be immense.  It also destroys the political power of these companies and groups, such as the AMA and the insurance industry.

What you’re seeing in editorials like the one cited above, along with the so-called “debate” in Washington (and what drove Obamacare) is the inherent scam and fraud in the system as it has been designed and implemented. Whether FDR intended Social Security to be racist and sexist at its inception is not material to the debate, but the factual outcome as it exists today most-certainly is!

Yet nobody — not Democrat, Republican or even the so-called “Libertarian” party, all of which espouse equality under the law for all persons, will take these issues on and bring them to the forefront of public and political discussion.

Instead what we get is the Three-Card Monte game run by columnists in the NYT, along with the political class, seeking to divert us from the facts and figures that are right under our noses.

Isn’t it amusing how this is entirely ignored within the markets?

The U.S. fiscal gap, calculated (by us) using the Congressional Budget Office’s realistic long-term budget forecast — the Alternative Fiscal Scenario — is now $222 trillion. Last year, it was $211 trillion. The $11 trillion difference — this year’s true federal deficit — is 10 times larger than the official deficit and roughly as large as the entire stock of official debt in public hands.

We of course are not really talking about this.  Oh we do talk about the $1 trillion+, more or less, that we add to the “official debt”, but nowhere is mentioned the growth in the actual liabilities — if, that is, you accept that things like Medicare are actual obligations.

Hint: They’re not.

When fully retired, 78 million baby boomers will collect, on average, more than 85 percent of per-capita gross domestic product ($40,000 in today’s dollars) in Social Security, Medicare and Medicaid benefits. Each passing year brings these outlays one year closer, which raises their present value.

No they won’t.  Not because they won’t try to, but because the working people of the nation won’t pay it.  If pressed that hard they will do what all people do when pressed hard enough — they will revolt, violently if necessary.  The reason why is obvious and inescapable; nobody submits to being a slave voluntarily and communism doesn’t work as the quality and quantity of work drops as you try to put your boot on the people’s neck.

Ask young people about this – will you give up everything you earn and have so your Dear Old Dad can live in the way to which he is “entitled”, including all the medical care he wants despite being 300lbs and eating like a pig for the last 30 years?

Answer: No.

Compassion?  Sure, especially for their own parents.  But forcible extraction of literally every bit of value in the labor that working people have so that the “old farts” can sit in their ass and collect that to which they’re “entitled”?

Not a prayer in Hell.

That’s a problem.

The answer for the U.S. isn’t pretty. Closing the gap using taxes requires an immediate and permanent 64 percent increase in all federal taxes. Alternatively, the U.S. needs to cut, immediately and permanently, all federal purchases and transfer payments, including Social Security and Medicare benefits, by 40 percent. Or it can mix these terrible fiscal medicines with honey, namely radical fiscal reforms that make the economy much fairer and far stronger. What the government can’t do is pay its bills by spending more and taxing less. America’s children, whose futures are being rapidly destroyed, are smart enough to tell us this.

Actually, if we don’t cut this crap out they’re going to tell us with guns, pitchforks and torches — or simply by refusing to work at all.

This is the problem with confiscatory tax rates — they drive behavior.  People say that “very few” people ever paid the 90% tax rates of years past.  That’s true.  Nobody made that much, on purpose.

You could set the tax rate over $250,000 at 100% if you wanted to.  There are two problems with such a move — first, doing so wouldn’t close the deficit (there aren’t enough people who make over $250,000 and enough income to steal doing this to reach budget balance) but more importantly if you did this the next year nobody would make more than $249,999 since they would get to keep none of it!

What would that do to our economy? Good question; a lot of people would spend a lot of time at the beach instead of innovating and creating, I suspect.  And while this might be good for the makers of rum and various other libations, I doubt very much the net economic effect would be positive.

As I noted yesterday  (and, I might note, forms one of the key items in Leverage, available to the right) there are interconnected items in our national debate that nobody wants to talk about as interconnected items.  Yet we have to, because they form the basis of the fiscal challenges we face.

Policy decisions were intentionally taken that, on any objective basis, amount to massive frauds against the public.  A tiny minority of people — banksters — have benefited tremendously from these frauds.  The expansion of the credit bubble over the last 30 years has made a tiny percentage of the population fabulously “wealthy” but the wealth they obtained was false prosperity in the first instance.  It appeared to be “freely earned and/or given” but it was not; it was stolen as the premise under which it was tendered wasknowingly false and the beneficiaries are the ones who constructed the knowingly-false edifice under which they obtained it.

When you get down to brass tacks it all comes down to the reality of two exponential functions.  They always run away from one another.  It cannot be otherwise; this is a basic principle of arithmetic, and no amount of arm-waving can or ever will change it.

That’s the bottom line right there.  Any two growth functions, where one has a larger growth figure than the other, will run away from one another.  Growth in debt, irrespective of the name you give it (e.g. “entitlements”, whatever) may never exceed the growth in the economy.

If it does the above happens.  It will not happen some of the time, it will not happen only if you get unlucky, it will not happen only on Tuesdays, it will happen each and every time, without fail, and it will screw you each and every time without fail.  It must therefore never be allowed to happen.

This is what all fiscal policy debates are ultimately about.  It has never and will never be about anything else.  It can’t be about anything else, because this is the reality of that fiscal debate, whether people wish to deal with and admit it or not.

We’re still arguing over stupid things, more than 30 years after the alleged debate began.

Until we address and conform our debate to the above simple mathematical relationship no progress will be made, and the longer we wait to do so the higher the odds that an all-on fiscal and economic collapse becomes inevitable.