Tag Archives: Social Security

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

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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.

News

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

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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!

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Millennials who elected Obama will face high taxes, poverty and unemployment

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We can't raise taxes enough to fix this overspending
We can’t raise taxes high enough to fix this much overspending

My regular readers have probably noticed that I have stopped blogging about day-to-day politics, ever since the Republican primary candidates with conservative records (Cruz, Jindal, Walker) were eliminated from the GOP primary. I have heard though that the mainstream media is going all in to elect Hillary Clinton. My concern is that many people rely on television news and will never think about two really important issues. First, Obama has been the worst President in the history of the country and has destroyed the economy for decades to come. Second, his disregard for national security and weak foreign policy has emboldened the enemies of Western democracies, e.g.  Russia, Iran, etc. We will see the consequences of this (wars and terrorism) for years to come. Those are the real challenges we face as a nation.

This Hoover Institute article by Victor Davis Hanson explains the big picture that the mainstream media doesn’t care about.

Excerpt:

Consider the $20-trillion national debt. Most Americans accept that current annual $500 billion budget deficits are not sustainable—but they also see them as less extreme than the recently more normal $1 trillion in annual red ink. Americans also accept that the Obama administration doubled the national debt on the expectation of permanent near-zero interest rates, which cannot continue. When interest rates return to more normal historical levels of 4-5% per annum, the costs of servicing the debt—along with unsustainable Social Security and Medicare entitlement costs—will begin to undermine the entire budget.

Count up current local, state and federal income taxes, payroll taxes, property and sales taxes, and new health care taxes, and it will be hard to find the necessary additional revenue from a strapped and overtaxed middle class, much less from the forty-seven percent of Americans who currently pay no federal income taxes. The Obama administration has tried to reduce the budget by issuing defense cuts and tax hikes—but it has refused to touch entitlement spending, where the real gains could be made. The result is more debt, even as, paradoxically, our military was weakened, taxes rose, revenue increased, and economic growth remained anemic at well below 2% per annum.

The national debt is one ticking time bomb, but there are others. Illegal immigration and Muslim refugees create additional financial problems for the next generation of entrepreneurs and workers:

Illegal immigration poses a similar dilemma. No nation can remain stable when 10-20 million foreign nationals have crashed through what has become an open border and reside unlawfully in the United States—any more than a homeowner can have neighbors traipsing through and camping in his unfenced yard.

Likewise, there are few multiracial societies of the past that have avoided descending into destructive ethnic chauvinism and tribalism once assimilation and integration were replaced by salad-bowl identity politics. Common words and phrases such as “illegal alien” or “deportation” are now considered taboo, while “sanctuary city” is a euphemism for a neo-Confederate nullification of federal immigration laws by renegade states and municipalities.

Illegal immigration, like the deficits, must cease, but stopping it would be too politically incorrect and painful even to ponder. The mess in Europe—millions of indigent and illegal immigrants who have fled their own failed states to become dependent on the largess of their generous adopted countries, but without any desire to embrace their hosts’ culture—is apparently America’s future.

Progressive Christians and  left-leaning Republicans join Democrats in imposing costs on the next generation of taxpayers with open borders immigration policies. The bill for importing people who take more in welfare than they pay in taxes has to be paid by someone. Not only will taxes on individuals go up, but taxes on businesses will cause them to create fewer jobs, or move their production to countries that have lower taxes on business.

The rest of the article talks about more ticking time bombs created by young leftist voters. Obama’s anti-police rhetoric has created a crime crisis that will require more police, more incarceration and higher insurance premiums. Obama’s anti-school-choice policies have made it harder for the next generation to get the education they will need to offer value to employers. Without skills, you won’t have a job, and you will be poor – poorer than your parents’ generation.

Although most young leftists are ignorant about foreign policy, that did not stop them from voting to cause crises that will harm our economy, and may also draw us into war. Territorial disputes involving strong countries like Russia and China could easily lead to war. Sponsors of terrorism like North Korea and Iran have gained strength during Obama’s reign of stupidity. Wars that impact trading partners or allies will cost taxpayers money. And millennials are the ones who are going to get the bill for a failed foreign policy.

The article doesn’t mention other crises like the trillion dollar student loan bubble, or the next mortgage lending crisis, or the unfunded pension programs crisis, or Medicare going bankrupt, and then Social Security shortly after, etc. No one in the mainstream media mentions these things, and the millennials aren’t aware of these problems. It’s not in their culture to put financial concerns above having a good time. But closing your eyes doesn’t make a threat disappear. Millennials can’t study English in college, rack up student loans, spend all their money on alcohol, work minimum wage jobs, then travel to Europe in their 20s, and expect everything to work out when they get serious about career and savings at age 30. These crises – which millennials voted for – are going to make their lives harder than their parents’ lives ever were.