Tag Archives: Debt to GDP

Young workers are paying Social Security taxes but will they ever collect benefits?

What if we had no money for anything except entitlement spending?
What if we had no money for anything except interest and entitlements?

The way Social Security taxes work is that you pay 12.4% of your salary, and another 2.9% for Medicare. That’s 15.3%, before any federal, state and local taxes. So, what are you getting for this 12.4% contribution to the Social Security welfare program? You’re supposed to be able to withdraw that money when you retire, but that money isn’t being stored in an account with your name on it. It’s being spent right now on people who are already retired. Will there be money available for you to withdraw when you retire?

If you’re a young person who retires in 2035 or later, the answer is absolutely not.

The Daily Signal has the numbers:

The American people need to know the state of finances of the Social Security program so they can better understand why reform is not only necessary, but absolutely essential. Here are five takeaways from the most recent financial report:

  • $66 Billion Cash-Flow Deficit in 2016

Social Security is still considered solvent and able to pay full benefits because it has accumulated a $2.8 trillion trust fund, but since the entirety of its trust fund consists of IOUs, cash-flow deficits must be financed by general revenue taxes or new public borrowing.

Since 2010, the Old-Age and Survivors Insurance program has taken in less money from payroll tax revenues and the taxation of benefits than it pays out in benefits, generating cash-flow deficits.

  • $14.3 Trillion in Unfunded Obligations

However, this figure assumes that the $2.8 trillion in trust fund reserves are available to be spent. The problem is that these reserves represent liabilities for the U.S. taxpayer. The payroll revenues have been spent and the trust fund was credited with U.S. bonds, which represent claims on the American taxpayer. This is why the actual unfunded obligation is $14.3 trillion.

The trustees report that Social Security’s unfunded obligation has reached $11.5 trillion. That is the difference between what the program is expected to receive in income and what is expected to spend over the 75-year horizon the program’s actuaries consider for projections.

  • Insolvent by 2035

Based on current projections, the Social Security Old-Age and Survivors Insurance trust fund will be depleted by 2035, reducing Social Security’s expenditures automatically to what the program will receive in revenues, regardless of benefits due at that time.

Social Security is only legally permitted to spend funds in excess of its revenues until its trust fund is depleted.

  • 25 Percent Automatic Benefit Cut

What this means for beneficiaries is that in the absence of congressional action, benefits could be delayed or indiscriminately reduced across the board by 25 percent.

Once the Social Security trust fund is depleted, the program will only be able to pay 75 percent of scheduled benefits, based on payroll and other Social Security tax revenues projected at that time.

  • High Costs to Delaying Reform

The trustees highlight that if Congress waits until the trust funds become exhausted, the cost of making the program solvent will be as much as 40 percent higher, meaning significantly greater benefit cuts and/or tax increases for workers and beneficiaries.

There are several key reforms Congress could pursue to preserve benefits for the most vulnerable beneficiaries without increasing the tax or debt burden on younger generations. However, the longer Congress waits the act, the larger the changes that will be necessary to address Social Security’s combined financing shortfall.

Young people working today who retire in 2035 or later will never see a dime of their Social Security contributions. What’s more likely is that the taxes on their income will go even higher. Take a good look at your paycheck, and you will see money being deducted for this entitlement program. This is money you will never see again. It is being used now, to buy the votes of elderly people who vote against reform when they vote Democrat.

The only person to try to do something about these Social Security problems was George W. Bush – a Republican. But his effort to set up private savings accounts was stopped by Democrats, who depend on the votes of the people who collect from Social Security.

These problems are even worse when you realize that Social Security is only one of the entitlement programs that is going bankrupt. There are others – as well as interest on the $20 trillion debt. ($10 trillion of which was added by Obama in his 8 years as Welfare President). Young people: you are paying taxes for programs that will not be there for you when you need them. Stop voting Democrat, because money matters!

Conservative Party of Canada on track to deliver budget surplus in 2015

Prime Minister Stephen Harper
Prime Minister Stephen Harper (Conservative Party)

Story from Yahoo News about the results delivered by the Conservative Party of Canada.

Note: To understand the numbers in the article, simply multiple the numbers by 10 to compare with American numbers – Canada’s economy is about 1/10 the size of ours. For example, our GDP is $15.7 trillion and theirs is $1.8 trillion. Our national debt is $17 trillion, while their’s is $1.2 trillion.

Excerpt:

Canada’s Conservative government looks set to comfortably balance its books in 2015 or even sooner, its latest budget showed on Tuesday, with cuts in spending on the public service more than offsetting a series of modest new expenditures.

The low-key spending plan leaves Prime Minister Stephen Harper well-positioned to offer tax breaks and other initiatives in the runup to an election scheduled for October next year.

“Some people will say this budget is boring,” Finance Minister Jim Flaherty told reporters ahead of the budget speech. “Boring is good.”

The budget shows a deficit of C$2.9 billion ($2.63 billion)in the 2014-15 fiscal year, up from the previous estimate of C$5.5 billion. That balance includes a C$3 billion contingency fund, which in fact reveals an underlying surplus that year.

Flaherty acknowledged the budget would be narrowly balanced this coming year without the contingency fund, but said he preferred to have a “nice clean surplus next year”.

The government estimates a bigger-than-expected C$6.4 billion surplus in 2015-16. In the year ending March 31 of this year, the deficit is pegged at C$16.6 billion.

[…]Flaherty, who is 64 and battling a rare skin disease, has staked his reputation on eliminating Canada’ small deficit, equivalent to about 1 percent of gross domestic product (GDP), and restoring the reputation the country had before the global financial crisis as having the strongest fiscal record in the Group of Seven major economies.

Germany is currently the only G7 country running a surplus, but Canada’s ratio of debt to GDP is substantially less and it is one of a handful of countries with a triple-A rating from rating agencies.

Canada is beating us in debt to GDP:

G7 Debt to GDP as of 2013
G7 % Debt to GDP as of 2012 (lower is better)

Canada is beating us in economic growth:

G7 GDP growth for 2013
G7 % GDP growth from 2007 to 2012 (higher is better)

Source: BBC Business

The next Canadian election is in 2015. I know that the Liberal Party is currently leading in the polls, but I found some good news. The Canadians just redistricted after their census, and there are 30 new electoral districts. If the same turnout occurs in 2015 which occurred in the 2011 election, then the Conservative Party of Canada would get 22 out of 30 of those new seats. However, I am concerned. I want Harper to keep his majority, as he and Tony Abbott (Australia) are two bright conservative stars who show people what conservatives can do. 

Conservative Party MP Pierre Poilievre explains how Canada escaped the recession

Conservative M.P. Pierre Poilevre (Nepean-Carleton), a member of the majority government in Canada, explains how Canada embraced the free entreprise system that America has rejected, and the results they got.

Here is the speech that went viral on Youtube:

And here is his article in the liberal Huffington Post.

Excerpt:

In a few days the “fiscal cliff” deadline will arrive and potentially bring massive automatic spending cuts and tax increases. Even if Congress and the President agree to avoid the cliff, the next crisis awaits. Treasury Secretary, Timothy Geithner, wrote the Senate this week to report that the “statutory debt limit will be reached on December 31, 2012,” which will require extraordinary measures to prevent a mass default. These measures will give the government 60 days before it runs out of money and Uncle Sam’s head smashes into the so-called “debt ceiling.”

It has long been said that when the U.S. sneezes, Canada catches a cold. So why have these debt-related ailments in the U.S. not afflicted the Canadian government?

The answer is that Canada has been practicing what the U.S. always preached: free markets, low taxes and minimal state interference. And it is working.

For example, Canada avoided the interventionist policies that led the U.S. to the sub-prime crisis.

In an attempt to expand home ownership, administrations from Carter to Bush Jr. forced banks to offer mortgages to people who would otherwise not qualify for them. Washington then ordered government-sponsored enterprises such as Freddie Mac and Fannie Mae to insure these “sub-prime” mortgages.

According to a 2010 Report on the U.S. Financial Crisis by the World Bank’s Development Research Group, Freddie and Fannie bought an estimated 47 per cent of these toxic mortgages. Harvard financial historian Niall Ferguson indicates that the amount of mortgage debt backed by these government-sponsored enterprises grew from $200-million in 1980 to $4-trillion in 2007.(1) The government pumped so much air into the housing bubble that it burst in 2008. The resulting financial crisis led to government bailouts of the banking sector.

Big government caused the economic crisis. So we are told the solution is more big government. Funny how the problem becomes the solution.

Because the Canadian government did not impose sub-prime mortgages on the country’s charter banks, we avoided the crisis and did not bailout a single financial institution. To keep it that way, Canada’s Finance Minister has ended all government-backed insurance of low-down payment and long-amortization mortgages. In other words, if you want to take on risky debt, taxpayers will not insure you.

Governments must lead by example when managing their own debt and spending. Low debt is the result of low spending. Federal government spending as a share of the overall economy is 15 per cent in Canada (2) and 24 per cent in the U.S. (3). The numbers are not merely the result of prodigious U.S. military spending, though that is certainly a factor. Non-military federal government spending is 14 per cent of Canada’s economy (4), and 18 per cent of America’s (5).

Take a look at some of these graphs from earlier in the year about the Canadian 2012 budget. (This is straight from their government’s web site – they have new transparency/anti=corruption measures now, so the citizens know everything that government does). When comparing the deficit and debt of Canada to the United States, always multiply the Canadian number by 10 to get a benchmark to compare. For example, Canadian GDP is 1.7 trillion, and the US GDP is 15 trillion.

Canada’s budget deficit is around 30 billion, but ours is 1.2 trillion:

Canada Federal Budget Deficit / Surplus 2012
Canada Federal Budget Deficit / Surplus 2012

If we were doing as well as Canada, our deficit would be about $300 billion. But we have run up about 6 trillion in debt over 4 years! Not only that, but Canada’s national debt is only $600 billion. If we multiple that by 10, we would expect ours about $6 trillion. And it was that – during the Bush Presidency. But then the Democrats took over the House and Senate in 2007 and everything went wrong and we packed trillions and trillions onto the debt, including about $6 trillion during Obama’s first term.

Canada’s Debt to GDP ratio is 34%:

Canada vs US Debt to GDP
Canada vs US Debt to GDP

But things are even worse for the United States, now. The current United States Debt to GDP is 105%, according to official U.S. government figures. We are due for yet another credit downgrade, and should see Greece-like levels of Debt to GDP during Obama’s second term. We are spending too much, and we aren’t going to be able to make up trillion dollar deficits even if we confiscate every penny that rich people earn. (And they won’t be daft enough to keep working as hard if we did that – they would move, and probably to Canada)

What is happening to us here in the United States is self-inflicted. We are – and have been – voting to impoverish ourselves and generations of children born and unborn, by punishing those who work hard and play by the rules, and rewarding those who don’t work and don’t play by the rules. It didn’t have to be this way. We could have elected a President who actually knew something about business and economics. Knowledge matters. We can’t just choose a President who gives us the “tingles” and then expect him to perform the actual duties of being President. Competence is more important than confidence. Substance is more important than style.

Barack Obama’s Hawaiian vacation estimated to cost $4 million dollars

Obama plans to hit the golf course at taxpayer expense
Obama plans to hit the golf course at taxpayer expense

From Hawaiian Reporter. (H/T Director Blue)

Excerpt:

The U.S. Secret Service has arrived, street barricades are in place, and the U.S. Coast Guard has stationed itself in the waters surrounding Kailua, Oahu.

That is a sure sign President Barack Obama’s security team is preparing for the first family to arrive in the small beachside community as early as Friday night for what is expected to be a 17-day vacation.

The President and his family are traveling separately to Hawaii because he wants resolve the payroll tax cut issue before leaving Washington – and his wife does not want to wait.

But the advanced trip and the cost that comes with it – as much as $100,000 (flight and security) – adds to an already expensive vacation for the taxpayers.

Hawaii Reporter research shows the total cost for the President’s visit for taxpayers far exceeded $1.5 million in 2010 – but is even more costly this year because he extended his vacation by three days and the cost for Air Force One travel has jumped since last assessed in 2000. In addition, Hawaii Reporter was able to obtain more specifics about the executive expenditures.

The total cost (based on what is known) for the 17-day vacation roundtrip vacation to Hawaii for the President, his family and staff has climbed to more than $4 million. Here’s why.

TRAVEL: $3,629,622

The biggest expense is President Barack Obama’s round trip flight to Hawaii via Air Force One, a cost the GAO office estimated at $1 million in the year 2000. Contacted today, the GAO confirmed there is no report the independent office affiliated with Congress has prepared since 2000 to operate Air Force One and Air Force Two.

However, the U.S. Air Force provides the most current numbers of $181,757 per flight hour. Travel time for Air Force One direct from Washington D.C. to Hawaii is about 9 hours or $1,635,813 each way for a total of $3,271,622 for the round trip to Hawaii and back.

The cost for USAF C-17 cargo aircraft that transports the Presidential limos, helicopters and other support equipment to Hawaii was not made available. However, the flight time between Andrews Air Force Base and Hawaii is at about 21.5 hours roundtrip, with estimated operating cost of $12,000 per hour. (Source: GAO report, updated by C-17 crew member). The United States Marine Corps provides a presidential helicopter, along with pilots and support crews for the test flights, which travel on another C-17 flightThat is $258,000, not including costs for the 4 to 6 member crew’s per diem and hotel.

Mrs. Obama’s early flight to Hawaii costs about $63,000 (White House Dossier), but add security and personnel for a total of about $100,000.

The rest of that article calculates the remaining components of the FOUR MILLION DOLLAR bill.

On another topic, here is a re-cap on our budget situation in 2012:

Barack Obama, Budget Deficit and Debt to GDP
Barack Obama, Budget Deficit and Debt to GDP

Remember, the Democrats took control of the House and Senate in January 2007, and that’s when the overspending started.

Why should we expect someone who can spend FOUR MILLION dollars on a vacation to have the discipline and frugality to balance the nation’s books?