Tag Archives: Debt

Alexandria Ocasio-Cortez explains how she will pay for $40 trillion in new spending

Young people seem to think that implementing socialism in the United States won’t cost them a thing. The truth is, the rich don’t have enough money to cover all the spending that socialists want to do. It’s going to be young people who are stuck with the bill, and they’ll have to scale their lives down to third world levels to pay for what they voted for.

Here’s a socialist (former bartender) to explain how she would pay for $40 trillion in new spending, over 10 years:

The Daily Wire reports:

TAPPER: “Right. I get that. But the price tag for everything that you laid out in your campaign is $40 trillion over the next 10 years. I understand that Medicare for all would cost more to some wealthier people and to the government and to taxpayers, while also reducing individual health care expenditures. But I am talking about the overall package. You say it’s not pie in the sky but $40 trillion is quite a bit of money. And the taxes that you talked about raising to pay for this, to pay for your agenda, only count for two [trillion dollars]. We’re going by left-leaning analysts.”

OCASIO-CORTEZ: “Right. When you look again at how our health care works, currently we pay — much of these costs go into the private sector. So, what we see, for example, is, you know, a year ago I was working downtown in a restaurant. I went around and I asked how many of you folks have health insurance? Not a single person did. They’re paying — they would have had to pay $200 a month for a payment for insurance that had an $8,000 deductible. What these represent are lower cost overall for these programs. Additionally, what this is, it’s a broader agenda. We do know and acknowledge that there are political realities. They don’t always happen with just a wave of a wand but we can work to make these things happen. In fact, when you look at the economic activity that it spurs — for example, if you look at my generation, millennials, the amount of economic activity that we do not engage in. The fact that we delay purchasing homes, that we don’t participate in the economy as purchasing cars as fully as fully as possible is a cost. It is an externality, if you will, of unprecedented amount of student loan debt.”

TAPPER: “I am assuming I won’t get an answer for the other $38 trillion. We’ll have you back and go over that.”

Some people are going to vote for her just because she’s young, female, and sounds so passionate. But let’s take a look at some numbers so we can understand how feasible her plans are.

First, the rich don’t earn enough money to be able to pay for trillions of dollars in spending.

In 2012, John Stossel wrote this in Forbes:

If the IRS grabbed 100 percent of income over $1 million, the take would be just $616 billion.

In 2011, the Tax Foundation explained that even if you taxed ALL THE DISPOSABLE INCOME from all the people who make $200,000 or more, you would only raise $1.53 trillion dollars:

There’s simply not enough wealth in the community of the rich to erase this country’s problems by waving some magic tax wand.

[…]After everyone making more than $200,000/year has paid taxes, the IRS would need to take every single penny of disposable income they have left. Such an act would raise approximately $1.53 trillion. It may be economically ruinous, but at least this proposal would actually solve the problem.

Socialists want to spend $40 trillion more over 10 years, or about $4 trillion per year. Taking most of what the wealthy earn would make up less than half of that spending.

Anyway, we’re not in a position to be doing any spending, because the costs of our existing socialist programs will be increasing going forward.

Pretty soon, our mandatory expenses will consume all of our tax revenues
Pretty soon, our mandatory expenses will consume all of our tax revenues

USA Today explains:

After averaging 35 percent of national income from the mid-1950s through 2008, the national debt has surged to 78 percent today and is projected to reach 100 percent within a decade, and 200 percent by 2050. Even these scary estimates rest on rosy assumptions — no new military or economic crises and creditors willing to accept record-low interest rates from a government heading towards a debt crisis.

Just to be clear, he’s talking about the debt-to-gdp ratio. When ours gets too high, interest on the debt will rise, be ause lenders aren’t sure they’ll be getting their money back. This will put us into a debt death spiral.

More:

The cause of this coming debt deluge is no mystery: Social Security and Medicare are projected to run a staggering $82 trillion cash deficit over the next 30 years. We are adding 74 million retiring baby boomers to a system that provides Medicare recipients with benefits three times as large as their lifetime contributions and pays Social Security benefits typically exceeding lifetime contributions (even accounting for inflation and interest on the contributions).

We can’t afford the spending we’re already committed to right now:

Politicians promise changes to avoid cuts in Social Security and Medicare, but their alternatives are plainly insufficient. Democrats favor tax hikes on the rich, but even doubling the highest two tax brackets to 70 and 74 percent would close just one-fifth of these programs’ shortfalls — and even that assumes people keep working at 90 percent tax rates when including state and payroll taxes. Slashing defense spending to European levels would close just one-seventh of the gap. Single-payer healthcare proposals are projected by even liberal economists to increase the debt. Republicans favor cuts in antipoverty and social spending, but even the unimaginable elimination of all anti-poverty spending would close barely half of the shortfall.

So, who’s going to pay for all this? It will be the people who have to work and pay income taxes for the next 30 years. The very same young Americans who are voting for socialists today. They’re the ones who are going to have to survive on a fraction of what their parents earned.

But there’s more. The truth is that raising taxes on the wealthy will cause enormous damage to job creators. If you look at socialist countries, the unemployment rate among young people is astronomical compared to the USA today. Why? Because these other countries have taxed and regulated businesses so much that they simply don’t have money to hire people, and if they do hire people, they pay them less than what they can earn for the same work in America.

Reuters explains:

Last December, the most recent full figures available, 25 million of the EU’s workforce of 240 million were unemployed and actively looking for jobs, producing an unemployment rate of 11 percent.

An additional 11 million were unemployed but had stopped looking or were not immediately available to start work, and were therefore not classified as unemployed. Adding them to the total would bump the jobless rate up to 15 percent.

Then there were more than 9 million part-time workers who wanted to work more hours but had no opportunity to do so – they were counted as employed but felt underemployed.

And finally there were those who were overqualified for their jobs and might well have been making more money elsewhere if they had found the right match for their skills.

European socialism is a kind of hybrid of socialism and capitalism, so it’s not too bad.  In places like Cuba, and Venezuela, you get the real thing. I doubt that most young people really understand what is going on right now on the streets of Cuba and Venezuela. If they did, maybe they wouldn’t be voting for socialism here.

New study: “Medicare For All” would cost $32.6 trillion, but it’s actually more

A Christian friend of mine who is divorced with children surprised me by telling me that she favored single payer health-care. I asked her if she realized that people would have to be taxed to pay for all this free health care, and she seemed to be aware of it. But even I didn’t realize how much it would really cost.

Investor’s Business Daily reports on a couple of recent studies – one from the left, and one from the far-left – that both agreed on the price tag for universal health care.

Excerpt:

Last year, 16 Senators, including three presidential hopefuls, co-sponsored Sanders’ “Medicare for all” bill. And earlier this month, more than 70 Democrats signed on to form a “Medicare for all” caucus. Support for the bill is now something of a litmus test for Democratic hopefuls.

Do they have any idea what they’re endorsing?

A new study out Monday from George Mason University’s Mercatus Center finds that Sanders plan would add to federal spending in its first 10 years, with costs steadily rising from there. That closely matches other studies — including one by the liberal Urban Institute — that looked at Sanders’ plan.

To put this in perspective, “Medicare for all” would the size of the already bloated federal government. Doubling corporate and individual income taxes wouldn’t cover the costs.

Even this is wildly optimistic. To get to this number, author Charles Blahous had to make several completely unrealistic assumptions about savings under Sanders’ hugely disruptive plan.

The first is a massive cut in payments to providers. Sanders wants to apply Medicare’s below-market rates across the board, which would amount to a roughly 40% cut in payments to doctors and hospitals. Blahous figures this will save hundreds of billions of dollars a year.

But cuts of that magnitude would drive doctors out of medicine and hospitals out of business, since the only way providers can afford Medicare’s cut-rate reimbursements today is by charging private payers more.

The study also assumes that shoving everyone into a government health care plan would cut administrative costs by $1.6 trillion over the next decade and prescription drug costs by $846 billion. Neither of those are likely, and wouldn’t make much of a difference in overall spending anyway. Private insurance overhead accounts for about 6% of national health spending, and drugs less than 10%.

There’s also the fact that every other federal health program has seen costs explode “unexpectedly” after they were enacted. The per-enrollee cost of ObamaCare’s Medicaid expansion, for example, is almost 49% higher than expected. Medicare itself cost nearly 10 times as much as projected in its first 25 years.

The author of the Mercatus study was nominated Barack Obama to be a member of the Board of Trustees of the Social Security Trust Funds. That might explain his questionable assumptions about costs. And the Urban Institute is even further to the left. There can be no doubt that the true cost of the Sanders health care plan would be much higher than what these two studies calculated it to be.

Now, you might think that we can just tax the people who earn the most money to pay for all this spending.

In 2012, John Stossel wrote this in Forbes:

If the IRS grabbed 100 percent of income over $1 million, the take would be just $616 billion.

In 2011, the Tax Foundation explained that even if you taxed ALL THE DISPOSABLE INCOME from all the people who make $200,000 or more, you would only raise $1.53 trillion dollars:

There’s simply not enough wealth in the community of the rich to erase this country’s problems by waving some magic tax wand.

[…]After everyone making more than $200,000/year has paid taxes, the IRS would need to take every single penny of disposable income they have left. Such an act would raise approximately $1.53 trillion. It may be economically ruinous, but at least this proposal would actually solve the problem.

Taxing the rich isn’t enough to pay for single payer health care. $32.6 trillion over 10 years works out to $3.26 trillion per year. We’re not going to pay that off even with $1.53 trillion a year of additional revenue. And this is assuming that the wealthy would just allow themselves to be made into slaves, and keep working even if the government takes all their money.

Pretty soon, our mandatory expenses will consume all of our tax revenues
Pretty soon, our mandatory expenses will consume all of our tax revenues

Who is going to pay for all the spending we already have scheduled? As the graph above shows, things are going to get worse in the future as the big entitlement programs pay out more than current tax rates take in. I’m sure glad that I’m going to be retiring before 2032, and I’m not going to be stuck with the bill for this. It’s one thing for me to get out of bed every morning to be paid only 75% of what I earn. I certainly wouldn’t want to be working if the tax rates here were more like Europe, so that I’d be taking home less than half of what I earn. No thank you!

By the way, it might be a good idea to think about whether you want to have children or not before you vote. Children are expensive, and if we keep electing the big spenders like Obama, then there isn’t going to be any money left over to run a family and raise kids. Think about it before you vote with your feelings only.

New study: 1 in 8 divorces is caused by student loan debt

I already mentioned the studies that show that marrying a non-virgin is less stable than marrying a virgin. But what about student loans? Are they a risk factor for divorce, too? I was reading over at Captain Capitalism and saw this CNBC article, which discusses data relevant to our recent discussion about whether men ought to prefer debt-free virgins without tattoos.

Excerpt:

When it comes to student loan debt, “for richer, for poorer” doesn’t quite cut it.

In general, finances are the leading cause of stress in a relationship, according to a study by SunTrust Bank, but student debt takes a particularly hard toll on a marriage.

More than a third of borrowers said college loans and other money factors contributed to their divorce, according to a recent report from Student Loan Hero, a website for managing education debt.

In fact, 13 percent of divorcees blame student loans specifically for ending their relationship, the report found. Student Loan Hero surveyed more than 800 divorced adults in June.

Now, when deciding whether to marry and who to marry, it does make sense to me to think about what needs to be bought and how much these things cost, and where the money will come from. It just makes sense to me that people who are REALLY interested in marriage will be interested in doing what works to prepare for marriage. You can’t just do whatever you want before marrying, because marriage involves being faithful to your spouse, and buying things that you need for the marriage enterprise, like a home, and baby stuff. It doesn’t make any sense to say “I want to get married” and then not prepare for marriage by being careful about what behavior marriage requires of you.

This 2017 article from Harvard Business Review is interesting.

It says:

Examining 46,934 resumes shared on Glassdoor by people who graduated between 2010 and 2017, the researchers looked at each person’s college major and their post-college jobs in the five years after graduation. They then estimated the median pay for each of those jobs (also using Glassdoor data) for employees with five years of experience or less. Their key finding: “Many college majors that lead to high-paying roles in tech and engineering are male dominated, while majors that lead to lower-paying roles in social sciences and liberal arts tend to be female dominated, placing men in higher-paying career pathways, on average.”

Here’s the plot, and you can click it to expand it:

Starting salaries by major, broken out by gender
Median salaries by major, broken out by gender – don’t study things at the bottom!

Maybe we can just simplify this whole issue by saying “it’s unwise to marry people who choose not to prepare themselves for marriage”. That goes for men and women, by the way. Basically, you can avoid student loans if you study something that you don’t feel like studying, and work jobs that you don’t feel like working, and don’t buy things that you feel like buying. Don’t marry people who are led by their feelings. Marry someone who demonstrates self-control.

Anyway, I feel obligated to post a relevant Dave Ramsey video, just to remind everyone that stewardship of money is a Christian virtue, and that being forgiven by Jesus for your sins doesn’t make you good with money.

This one from 2014: (H/T Robb)

When I was in high school, I was far more interested in becoming an English teacher than I was in becoming a software engineer. It was my Dad who overruled my choice of college major when I was still in high school. He had me take a first-year English course at a local university. When I saw how politicized and useless it was (they were studying all sorts of politically correct postmodern relativist stuff, instead of the Great Works, and they weren’t trying to learn any wisdom from any of it), I chose computer science. I did what was likely to work, instead of what was easy and fun and made me feel good. I think this makes me a grown-up. And marriage should only be done if there are two grown-ups involved in the enterprise.

Conservatives vote against wasteful $1.3 trillion spending bill

The new Republican spending bill has nothing for conservatives
The new Republican spending bill has nothing for conservatives

Even though many conservative Republican congressmen voted against the massive spending bill, it still passed the House. All the Democrats voted for it. It’s a Democrat spending bill – there’s nothing in it that Trump promised. No money for the wall. No de-funding of sanctuary cities. No de-funding of Planned Parenthood. No de-funding of Obamacare.

CNBC reports:

The U.S. Congress was racing on Thursday to approve a massive spending bill and send it to President Donald Trump for enactment before a midnight Friday government shutdown deadline, in a move that would significantly boost defense and non-military funding through Sept. 30.

The House of Representatives planned to debate and vote on the measure on Thursday. If it clears the chamber, despite opposition from some conservatives protesting the measure’s crushing deficit spending, it is likely to have an easier time passing the Senate.

When coupled with recently enacted tax cuts, the bill is projected to result in budget deficits hitting more than $800 billion for this year. That could create political difficulties for Republicans running for re-election in November if the conservative wing of the party lashes out at this legislation.

[…]It also would deliver a further setback to Trump, whose proposals for severe cuts to the Environmental Protection Agency, State Department and other federal agencies would be scaled back.

The bill, which also excludes some of Trump’s immigration-related funding requests, was unveiled late on Wednesday. Senate No. 2 Republican John Cornyn said his chamber could take it up on Thursday night if no senator acts to slow it.

On Wednesday, the White House signaled that Trump would sign the legislation if Congress sends it to him.

House Republicans’ conservative Freedom Caucus on Thursday said its roughly three dozen members would not back the bill because it massively increases spending while not defunding Obamacare, Planned Parenthood and so-called sanctuary cities.

“You’re going to see lots of conservatives vote against it,” U.S. Representative Jim Jordan, a caucus member, told Fox News in an interview.

Trump at one point wanted $25 billion included in the bill to fully fund construction of his proposed U.S.-Mexico border wall, but negotiations with Democrats to make that happen fell apart early this week, according to congressional aides.

Instead, Trump would get nearly $1.6 billion more for border security this year.

Trump is busy lying about border wall funding in the bill, promising that “more will be forthcoming”. But this bill is a loss for conservatives. Ted Cruz has vowed to vote against the bill in the Senate, which tells you something about whether the bill is conservative or not. It’s garbage. We’re going back to trillion-dollar deficits to fund worthless government bureaucracies again.

 

How did Obama’s plan to let government run student loans work out?

Obama nationalized student loan administration in 2010
Obama nationalized student loan administration in 2010

I’m a free-market capitalist, so I believe that economic decision-making is best done by the people it concerns, not the people in government. If it is a decision that affects the family, let the family decide. If it’s a decision that affects the business, let the business owner decide. Obama has a different view – he thinks that government should make all of the decisions, even though government earns none of the money.

Here is an article in Investor’s Business Daily about his policy of letting the government take over student loan decision-making.

Excerpt:

A report from the Department of Education notes that the net cost of the federal government’s direct loan program is quickly heading into the red. This program, mind you, was supposed to be a moneymaker for the government, as students paid back federal loans with interest.

But as it turns out, borrowers have been flocking toward various loan forgiveness programs, by which the government will lose money, erasing gains from other loans. The report shows that the direct loan program went from a $25 billion surplus in 2012 to less than $5 billion by 2015.

A separate report says that this program ran a $36 billion deficit last year, up from $8.4 billion in 2016.

This is not how this federal loan program was supposed to work when President Obama launched it eight years ago.

In 2010, President Obama effectively nationalized student lending by cutting banks — which had been offering government-backed loans to students — out of the equation and having the government make the loans itself.

“By cutting out the middleman, we’ll save the American taxpayers $68 billion in the coming years,” Obama said when he signed this change into law. “That’s real money.”

As a result, federal student loan debt shot up from $154.9 billion in 2009 to $1.1 trillion by the end of 2017.

As everyone knows, under Obama’s big government leadership, the national debt skyrocketed from $10 trillion to $20 trillion in only 8 years. Obama ran up as much debt in his 8 years as ALL the other presidents, combined. Why? It’s simple. Because government isn’t as careful with other people’s money as people are careful with their own money. People make better decisions than government because they care about the money more – they earned it. The right people to solve an economic problem are the people in the families, and the people at the local bank branches nearby. When government takes over economic decision-making, they use other people’s money to buy the votes of people who make poor decisions.

We shouldn’t be allowing students to take 4-year vacations at taxpayer expense, so that they can learn English or Women’s Studies and then stick taxpayers with the bill. Some of those taxpayers had to study hard things like engineering and pay their own way. Some of those taxpayers had to get jobs in the trades as electricians and plumbers to pay for the bad decisions of these spoiled brats. Student loan administration should not be something for big government to control. When government decides who gets loans, students feel no pressure to study subjects and get credentials that will allow them to pay back what they borrowed. I want the banks to make the lending decisions and loan out their own money, so that they can deny people who are studying nonsense that won’t get a return.

That’s why we should never have elected a big-government liberal to be president. They make a lot of promises about how great they are with money, but it never works out. Big government is never the answer to problems that are outside of what the Constitution describes as the boundaries of government.

(Image Source)