The Great Bankrupt USA

[bobblehead]

while we debate whether gays should marry, I want to switch to a few links I posted that got lost on page 8 of another thread. I would like peoples reaction to these.

http://www.usatoday.com/news/washington/2007-05-28-federal-budget_N.htm


http://www.ncpa.org/iss/bud/2003/pd103003a.html


http://www.theatlantic.com/doc/200401/littlefield

All articles are similar, with slight math differences...I posted all 3 so people realize its not just one lone source fabricating this...its very real.

PS...gotta love this liine...

determined that, in effect, if the U.S. government were a company its owner would have to pay a rational investor $45.5 trillion to take it off his hands.

[bobblehead]

so we get 6 pages on gay marriage, but I can't get one response on our countries social programs being 50 TRILLION dollars in debt?

[hoosier]

so we get 6 pages on gay marriage, but I can't get one response on our countries social programs being 50 TRILLION dollars in debt?

People in here are too lazy or too busy to click on links. You gotta cut and paste (within reason) if you want a response. :wink:

[bobblehead]

Ok, here is the gist of all 3 articles, and its much shorter than my own rants. From the USA TODAY:
================================================== ==

Bottom line: Taxpayers are now on the hook for a record $59.1 trillion in liabilities, a 2.3% increase from 2006. That amount is equal to $516,348 for every U.S. household. By comparison, U.S. households owe an average of $112,043 for mortgages, car loans, credit cards and all other debt combined.

Unfunded promises made for Medicare, Social Security and federal retirement programs account for 85% of taxpayer liabilities. State and local government retirement plans account for much of the rest.

This hidden debt is the amount taxpayers would have to pay immediately to cover government's financial obligations. Like a mortgage, it will cost more to repay the debt over time. Every U.S. household would have to pay about $31,000 a year to do so in 75 years.

The Financial Accounting Standards Advisory Board, which sets federal accounting standards, is considering requiring the government to adopt accounting rules similar to those for corporations. The change would move Social Security and Medicare onto the government's income statement and balance sheet, instead of keeping them separate.

The White House and the Congressional Budget Office oppose the change, arguing that the programs are not true liabilities because government can cancel or cut them.

[LL2]

Probably the reason this thread isn't getting too many responses is because people are worried enough about rising gas and food prices to worry about another thing wrong with this country.

The government is much like a married couple with a big HELOC loan and 9 credit cards maxed out and not able to get thier spending under control. The problem with the government, at least one of many, is that no politician wants to give up funding for their districts special interest program. If Congress were to ever get serious about the national debt they would institute line item veto for the president and let the president cross out spending in the budget until it is balanced. Every program should make sacrifices for a while until spending is under control, but it will never happen. China is one of the wealthiest countries in the world with around $1 trillion in cash, while the U.S. is buried in debt.

[texaspackerbacker]

Some of us--apparently not very many--think economics is more interesting--not to mention infinitely more important than the gay crap.

Bobblehead, I would be a lot less kind in my words if this was posted by one of the leftists--with their consistent disparaging of America and all things American. You, at least, I know are coming at this from sincere concern for the country.

IMO, this negativism in the face of the unparalleled excellence of life in this country only plays into the hands of the haters who are trying to get into office and ruin things.

All we have had is slow growth for several quarters--not even a downturn, much less a recession. Unemployment is still low. Inflation is still low, despite gas prices--which really aren't that big a deal if you get down to figuring how much you are actually spending, the housing "crisis" is largely confined to areas where the "boom" went too far, and most credible predictions are for all of those things to take a turn for the better as early as the second half of '08. Most significant of all, though, is that virtually ALL of us are living very well with no sign of things getting worse.

You analogy of the country to a corporation is at the same time right on and flawed. Yes, if a corporation had a lot of debt for its size, it could be construed as a negative, BUT ONLY IF ITS PROFIT--WHICH IS THE EQUIVALENT IN THE ANALOGY TO ECONOMIC GROWTH FOR A NATION WAS NEGATIVE OR TOO SMALL OVER AN EXTENDED PERIOD OF TIME TO PAY THE DEBT SERVICE.

Ask yourself, what is the purpose of corporate debt or personal debt and mortgages? It is to amplify the good times--which would be chugging along at a slow pace with a high rate of return/OK lifestyle just on a pay as you go basis. However, corporate profits are extremely much more if you can maintain the rate of profit on a greater investment--based on debt, and an individual's life can be much nicer much quicker with mortgages, credit cards, auto loans, etc. Similarly, government enables our free enterprise capitalist economy to flourish by increasing the total money in the system--which is what government debt does, and that enhances the good times for everyone in a lot of ways.

Furthermore, unlike individuals and corporations, who are susceptible in varying degrees to the prospect of not being able to pay their debts and ACTUALLY going into bankruptcy--like your thread title implies, that won't happen for the government, as it controls the money supply--kinda like if we all had a printing press in the basement. Sure, in theory, that could be inflationary, but it hasn't happened, and it won't happen--barring stupid tax increases--because of the Multiplier Effect.

Life is good. Sit back and enjoy it. Don't be like an idiot leftist, continually finding fault with America--even if your motives are more pure than theirs are.

[bobblehead]

Probably the reason this thread isn't getting too many responses is because people are worried enough about rising gas and food prices to worry about another thing wrong with this country.

The government is much like a married couple with a big HELOC loan and 9 credit cards maxed out and not able to get thier spending under control. The problem with the government, at least one of many, is that no politician wants to give up funding for their districts special interest program. If Congress were to ever get serious about the national debt they would institute line item veto for the president and let the president cross out spending in the budget until it is balanced. Every program should make sacrifices for a while until spending is under control, but it will never happen. China is one of the wealthiest countries in the world with around $1 trillion in cash, while the U.S. is buried in debt.

I agree with some of your assertions about politicians not wanting to give up funding, but all three of these articles make the same point. Medicare, SS and employee pensions make up 85% of this unfunded liability. National debt is manageable at this point (as tex has clarified in other posts).

China is not one of the wealthiest countries in the world when you consider national assets, but that isn't even really relevant to this discussion. I would submit that america is still by far the wealthiest nation in the world. Some like Dubai may pass us on a per capita basis, but we are far and away the wealthiest in terms of assets.

I guess more to the point, the problem isn't in the now, we are taxing a lot of people for SS and medicare while only a few collect, the problem comes when you and I get there and we are 50 trillion short. It is actually similar to what happened at some airlines where huge pensions were promised to employees but never funded ahead, and when it came time to pay up they filed bankruptcy thus screwing all those employees. The US gov't will be in that exact situation in the future.

[bobblehead]

Some of us--apparently not very many--think economics is more interesting--not to mention infinitely more important than the gay crap.

Bobblehead, I would be a lot less kind in my words if this was posted by one of the leftists--with their consistent disparaging of America and all things American. You, at least, I know are coming at this from sincere concern for the country.

IMO, this negativism in the face of the unparalleled excellence of life in this country only plays into the hands of the haters who are trying to get into office and ruin things.

All we have had is slow growth for several quarters--not even a downturn, much less a recession. Unemployment is still low. Inflation is still low, despite gas prices--which really aren't that big a deal if you get down to figuring how much you are actually spending, the housing "crisis" is largely confined to areas where the "boom" went too far, and most credible predictions are for all of those things to take a turn for the better as early as the second half of '08. Most significant of all, though, is that virtually ALL of us are living very well with no sign of things getting worse.

You analogy of the country to a corporation is at the same time right on and flawed. Yes, if a corporation had a lot of debt for its size, it could be construed as a negative, BUT ONLY IF ITS PROFIT--WHICH IS THE EQUIVALENT IN THE ANALOGY TO ECONOMIC GROWTH FOR A NATION WAS NEGATIVE OR TOO SMALL OVER AN EXTENDED PERIOD OF TIME TO PAY THE DEBT SERVICE.

Ask yourself, what is the purpose of corporate debt or personal debt and mortgages? It is to amplify the good times--which would be chugging along at a slow pace with a high rate of return/OK lifestyle just on a pay as you go basis. However, corporate profits are extremely much more if you can maintain the rate of profit on a greater investment--based on debt, and an individual's life can be much nicer much quicker with mortgages, credit cards, auto loans, etc. Similarly, government enables our free enterprise capitalist economy to flourish by increasing the total money in the system--which is what government debt does, and that enhances the good times for everyone in a lot of ways.

Furthermore, unlike individuals and corporations, who are susceptible in varying degrees to the prospect of not being able to pay their debts and ACTUALLY going into bankruptcy--like your thread title implies, that won't happen for the government, as it controls the money supply--kinda like if we all had a printing press in the basement. Sure, in theory, that could be inflationary, but it hasn't happened, and it won't happen--barring stupid tax increases--because of the Multiplier Effect.

Life is good. Sit back and enjoy it. Don't be like an idiot leftist, continually finding fault with America--even if your motives are more pure than theirs are.

Just a couple points to get you riled up: 1) the bush administration changed the factors in calculating inflation, by clinton standards we are having much higher inflation. 2) I agree the housing crisis is only a big deal in that it damaged credit markets which are necessary smooth growth. 3) "all we have to do is slow growth" c'mon, according to conclusions on all three articles, to continue benefits as they are we would need between 40-59 trillion (depending on which article) at 6% RIGHT NOW. Since the economy grows at 4% in good times we CAN NOT outgrow this problem. 5) you are dead opposite of the point of debt, its not to amplify the good times, its to smooth out the bad times. 6) I'm past the debt/multiplier arguement now as we have mostly agreed, but found a little bit of difference. This is about an unfunded liability. A promise the govn't is making, taking out money now, with no hope of fulfilling said promise.

If your premise were right, why did we raise the retirement age for SS? Why did clinton decide to tax SS benefits (no different than decreasing them)?? Why is barrack, and mccain discussing ways to further save the program that by your arguement we should simply be growing into saving? Its cuz the promises are WAY outpacing growth as happens with all social programs. Any time a politician says we can have national health care for 300 billion a year, read that as 3 Trillion a year (mulitiplier that I believe in)

[texaspackerbacker]

Point 1, I hadn't heard that. I'll just say, it sure doesn't SEEM like we are having any significant inflation. Also, if this were any kind of a major factor at all, you know the Bush-hating leftist mainstream media would have made a colossal deal about it.

Point 2, interest is STILL down at 5.5-6%--a full 3% lower than at any time from 1078-1996 when I was in the real estate business. I'd say, the mortgage credit markets are just fine.

Point 3, What is this $40-59 trillion again? The actual figure for total national debt is $9.4 trillion. This year's deficit is forecast to be $350-400 billion. 2007 GDP was $13.8 trillion. 4% growth based on that would be over $550 billion. Your conclusion about growth not being able to beat debt increase is therefore, faulty. The more relevant figure, anyway, is debt service compared to growth. I would estimate that the government pays at a rate of 2-2.5%, which would be around $200 billion--far short of the rate of growth.

Point 4, you didn't have a Point 4.

Point 5, Bobblehaed, do you or people you know use mortgages, car loans, or credit cards merely to "smooth out the bad times"? Hell No. Do corporations use debt merely to smooth over bad times? Hell No. They use it to have their profits calculated as a percentage of a much greater base. The Cost of Capital concept says you don't borrow unless you have a reasonable expectation of higher return than the cost of the debt, Likewise, government does NOT only borrow in bad times to "smooth things over". It borrows routinely, increasing the money supply every time it does, which stimulates the economy for everybody.

Point 6, by "unfunded liabilities", are you referring to the liberal-speak concept that tax cuts need to be "paid for" with spending cut, and that spending needs to be "paid for" with tax increases? If so, that's just wrong, and has been proven wrong over and over in the past half century or more. Or are you referring to ongoing programs like Social Security, etc. that do NOT always have sufficient advance funding to project into payment for future years? If so, again, no problem. If the trust fund runs short or other programs don't even have a similar mechanism , no problem. Just pay for them out of the general fund like current spending.

The retirement age is STILL 62. I am intimately aware of that, being 61 and 2 months right now. True, you can make more by waiting until 67 or 72, but that would hardly be called an age increase.

Why did Clinton tax SS benefits? Because he's a liberal idiot, maybe? Agreed, costs of all such programs seem to be underestimated. I don't see this as a big deal, though. I would AGAIN cite the ol' M word as the REASON why the additional spent on those programs to not be harmful, and maybe even beneficial.

[bobblehead]

2) agree, credit markets are back to normal where you actually have to put some money down, but a bit tighter, no biggie.

4) I can't count.

5) debt leveraged projects are different than people or gov't. I can't leverage my income unless I invest it (which I do, I keep my mortgage maxed to allow me more investment capital, but I am the EXTREME minority), spending it will have the exact opposite effect.

6) no, not that at all, I'm blaming the liberals for outrageous social programs that allow them to tax many now to pay a few. Later when the many are ready to collect, the cupboards are bare. Its not like we can borrow a little bit later, we are 40-59 TRILLION short.

chart:

Full Retirement and Age 62 Benefit By Year Of Birth Year of Birth 1. Full (normal) Retirement Age Months between age 62 and full retirement age At Age 62 2.
A $1000 retirement benefit would be reduced to The retirement benefit is reduced by 3. A $500 spouse's benefit would be reduced to The spouse's benefit is reduced by 4.
1937 or earlier 65 36 $800 20.00% $375 25.00%
1938 65 and 2 months 38 $791 20.83% $370 25.83%
1939 65 and 4 months 40 $783 21.67% $366 26.67%
1940 65 and 6 months 42 $775 22.50% $362 27.50%
1941 65 and 8 months 44 $766 23.33% $358 28.33%
1942 65 and 10 months 46 $758 24.17% $354 29.17%
1943-1954 66 48 $750 25.00% $350 30.00%
1955 66 and 2 months 50 $741 25.83% $345 30.83%
1956 66 and 4 months 52 $733 26.67% $341 31.67%
1957 66 and 6 months 54 $725 27.50% $337 32.50%
1958 66 and 8 months 56 $716 28.33% $333 33.33%
1959 66 and 10 months 58 $708 29.17% $329 34.17%
1960 and later 67 60 $700 30.00% $325 35.00%
======================

as you can see, they are moving the carrot further away cuz that way they can keep us paying longer and collecting less. They also are slowly cutting it away. I guess my complaint is that either they have to eliminate SS (while maintaining the tax) or increase taxes lots....and you and I agree you can't raise taxes without damaging the economy.

The biggest problem with bush and supply siders (which you are one) is that you think we can outgrow ANY problem.....I am a supply sider as well, but there are limits.

PS...in your point 6 you summed up liberal thinking...no problem, just pay for it outta the general fund. Right now that is fine, they run a surplus, what happens when they are running a huge deficit every year....I now, borrow more we can outgrow it.

[texaspackerbacker]

You still did not explain this $40-59 trillion figure--the whole national debt is only $9.4 trillion, and there's no way they would ever retire any significant amount of that. It would contract the money supply so badly that the economy would be ruined.

I think you are wrong about being in the minority about maxing your mortgage debt. Practically everybody does that through the prime years of their life--although they may not do it for investment like you are talking about, but rather to have more toys and luxuries while they are young enough to enjoy them. Same with credit cards and consumer loans.

I don't fully understand your SS chart, but apparently it has something to do with receiving less if you start at age 62. With cost of living increases, etc., though, the age 62 fugure is more than it was not many years ago before this triple starting point thing. The difference is even more pronounce, though, if you wait until age 72. The thing is, however, there is a cap per family which comes into play, so if husband and wife both have their SS benefits, the age 62 start is best. If you wait until 67 or 72, you don't both get the full amount anyway.

Hell Yeah, I think we can outgrow virtually any adverse situation. The ONLY exception might be money going out of the country--foreign aid or this Obama disaster called Global Poverty Act which you alluded to in the other thread. Theoretically, even there, growth would occur on a worldwide scale, but the rest of the world is so far behind us that it would take too long and too much sacrifice before the money turned over enough times to bring benefit back to us.

[Patler]

If your premise were right, why did we raise the retirement age for SS? Why did clinton decide to tax SS benefits (no different than decreasing them)?? Why is barrack, and mccain discussing ways to further save the program that by your arguement we should simply be growing into saving? (mulitiplier that I believe in)

The social security funding "crisis" has been around for at least 25 years. I was very good friends with a higher official in a regional office of SS and we had this discussion at length in the very early 1980s.

One of the principle reasons for increasing the age categories for SS was simply because of the increased life expectancy of people who actually reach retirement age. The program, on average per recipient, was paying retirement benefits for a lot more years than when it was started. It wasn't just the growing number of new recipients that was causing problems, it was also the increased length of time each recipient was collecting. The age changes were designed to address that problem.

There is a big difference between a business undertaking future liabilities and the Feds having a program like SS. The business will have to pay the liability eventually. If SS reaches insolvency, the Feds can simply change the payout one way or another. Cash flow problem solved.

Social Security was never intended to be a national retirement program. It was established more as a federal welfare program for the financially disadvantaged of retirement age. Funding was a tax of less than 1% (I believe) on only a very small percentage of the highest wage earners. Those who payed into it were never intended to be the ones who necessarily collected from it. Of course, the program evolved quickly into something it was never intended to be. The income limits stayed relatively the same even as wages increased significantly so that more and more middle income individuals were paying into the fund. As a result, more and more felt "entitled" to some type of return from it, and the legislators made sure they got it. More and more retirees relied on it as a principle source of income during their retirement years, so benefits were increased. However, the program was still financially managed similarly to any tax-sourced welfare fund rather than as an investment fund of an individuals account. That's what got us where we are today.

I think change is coming. Many companies have gone away from traditional retirement programs to individual accounts for their employees which have the potential to be much, much better for the individuals when they retire. Many of these young workers are not counting on SS to even be there when they retire, and they simply will not need it. The program will scale back payouts accordingly and the financial crisis will be solved. This will not come without some difficulties, and a generation will have paid a lot into it for little or nothing back, just like any other tax they pay.

[bobblehead]

If your premise were right, why did we raise the retirement age for SS? Why did clinton decide to tax SS benefits (no different than decreasing them)?? Why is barrack, and mccain discussing ways to further save the program that by your arguement we should simply be growing into saving? (mulitiplier that I believe in)

The social security funding "crisis" has been around for at least 25 years. I was very good friends with a higher official in a regional office of SS and we had this discussion at length in the very early 1980s.

One of the principle reasons for increasing the age categories for SS was simply because of the increased life expectancy of people who actually reach retirement age. The program, on average per recipient, was paying retirement benefits for a lot more years than when it was started. It wasn't just the growing number of new recipients that was causing problems, it was also the increased length of time each recipient was collecting. The age changes were designed to address that problem.

There is a big difference between a business undertaking future liabilities and the Feds having a program like SS. The business will have to pay the liability eventually. If SS reaches insolvency, the Feds can simply change the payout one way or another. Cash flow problem solved.

Social Security was never intended to be a national retirement program. It was established more as a federal welfare program for the financially disadvantaged of retirement age. Funding was a tax of less than 1% (I believe) on only a very small percentage of the highest wage earners. Those who payed into it were never intended to be the ones who necessarily collected from it. Of course, the program evolved quickly into something it was never intended to be. The income limits stayed relatively the same even as wages increased significantly so that more and more middle income individuals were paying into the fund. As a result, more and more felt "entitled" to some type of return from it, and the legislators made sure they got it. More and more retirees relied on it as a principle source of income during their retirement years, so benefits were increased. However, the program was still financially managed similarly to any tax-sourced welfare fund rather than as an investment fund of an individuals account. That's what got us where we are today.

I think change is coming. Many companies have gone away from traditional retirement programs to individual accounts for their employees which have the potential to be much, much better for the individuals when they retire. Many of these young workers are not counting on SS to even be there when they retire, and they simply will not need it. The program will scale back payouts accordingly and the financial crisis will be solved. This will not come without some difficulties, and a generation will have paid a lot into it for little or nothing back, just like any other tax they pay.

I guess you sum up my point, they are eating into the benefits, but the tax remains. Same will happen for medicare and national health care if it ever passes. Our gov't is passing wonderful programs to take care of us....taxing us....then they are giving us a fraction, if any, of what they promised? You don't have a problem with this?? My chart tex was showing that they keep raising the age you can collect further away, but maintaining gainful employment in those years isn't easy for everyone. They are doing the same with medicare already...cutting services they used to cover.

The 40-59 Trillion is this: You pay into SS tax, 1000. More people are paying into than recieving it in the NOW. Result...1000Y surplus where Y is the extra paying in. Gov't spends it on pet projects or whatever. Down the road you start recieving, but now people paying into it are less than those recieving it. Gov't never saved the extra when it was there, but now they need to pay it when its a shortfall. The net result of the extra being paid in now by all of us is 40-59 trillion(in net present value) which will be a shortfall later. The only thing gov't can do is cut benefits, or somehow raise the money to pay for it, and you and I both agree that raising taxes to 90% won't result in a 90% increase in revenues...it will cripple the economy. sidenote: I agree with you about maxing the mortgage, my point is just as you said, most people buy toys, a negative leverage, I invest it, a positive leverage, I'm a huge minority.

I would submit patler that the money in is still far outweighing the money out at this point so cutting benefits in any form right now is done for one purpose....more money for our pig politicians to spend now. Life expectancy and all that crap is just that...crap. And as I pointed out, businesses don't have to pay it eventually, they just go bankrupt and those that worked for it and deserve it are left out in the cold...I can't think of anything more immoral. The only reason companies went away from unfunded promises is because politicians made it illegal....hmmm....but not for themselves.

In case you missed my other thread I want to post my numbers here again so you understand just what we could do privately with the SS money if they would stop taking it.

================================================== ===

Lets be VERY MODEST in our assumptions so there is NO POSSIBLE way anyone can accuse me of being unrealistic in my calculations.

Lets say you earn EXACTLY 20k every year (for simplicity, and I hope most of you earn more than that especially as an average).

Lets say you earn 5% on your money every year (will calculate the same as if you average 5%)
I choose this number cuz that allows you to carry peoples mortgages (at a great deal to them no less) use bank CD's, you know, the absolute safest investments known to mankind. This is a number that is unrealistically low, if any financial advisor tells you to expect 5% with him, fire him and find someone else.

OK on to the answer.

At age 65 you would have $484,000 (your money, not the gov'ts)
If you continue to earn a whopping 5% how much and how long can you draw?
If you live to be 100 you can draw $2442 per month without going broke.

This is the system that our government can't seem to manage. People earning 20k will NOT get 2442 a month and will not be able to leave money to their kids if they die before 100. LBJ raided the social security trust fund and every congress since simply puts the money in the budget and moves on. Now I ask you....are these the people you want in charge of your health care? I'll also ask you...doesn't bush's privatizing social security sound pretty good all of a sudden?

sidenote: if we change to 6% (still VERY low) it becomes
670,000 and withdrawal of 3820 a month, and if you only live to 95 you can withdraw over 4000 a month. See, the numbers get silly fast, and i'm still not even close to reasonable expectations.

[texaspackerbacker]

So, Bobblehead, this mysterious $40-59 trillion figure is the total of Social Security payouts trailing off into infinity--the present value of it, no less, which you refer to as unfunded liabilities due to the fact that the government has used a portion of the Social Security trust fund. Am I interpretting what you claim correctly?

First of all that figure is literally SIX TIMES the entire total of the National Debt! You'll have to excuse me if I don't believe that number is remotely realistic.

Secondly, I don't think anybody has ever claimed that the government has used ALL of the SS trust fund or even a significant fraction of it. Is that what you are claiming?

And third, the government does NOT merely appropriate that money--done and gone, that's it. What happens is that the government BORROWS the SS money--out of one pocket into another, yes, but a legitimate transaction just the same. The SS fund receives government securities--debt instruments--in return.

As you and I discussed in an earlier post, this government debt turns over and turns over also to infinity and beyond. Now I suppose, that's just a roundabout way of saying the future money will come out of the general fund, but at least there is a paper trail.

Basically, this is much ado about nothing--even if your $40-59 trillion figure is somehow realistic--which I very much doubt.

[bobblehead]

You can doubt it all you want, but when a liberal paper like the USA TODAY is saying we are 59 trillion short to pay for liberal social programs, it just might be true. Plus I posted 3 seperate links with 3 sources calculating it (thus the range of 40-59), they can't all be that wrong.

Its not JUST SS, its a combination of all the programs that are collecting taxes now, that are put into the general fund and spent...you know, SS, medicare, medicaid, Gov't employee pensions, ect.

Actually click on the first link, the USA TODAY article and read it and tell me it isn't credible
http://www.usatoday.com/news/washington/2007-05-28-federal-budget_N.htm
=============================================

The federal government recorded a $1.3 trillion loss last year — far more than the official $248 billion deficit — when corporate-style accounting standards are used, a USA TODAY analysis shows.
=============================================
and this:

This hidden debt is the amount taxpayers would have to pay immediately to cover government's financial obligations. Like a mortgage, it will cost more to repay the debt over time. Every U.S. household would have to pay about $31,000 a year to do so in 75 years.
==================================================

I know you are a supply side worshipper, I'm a believer in it too, but there is a thing called the law of diminishing returns....its a calculas equation, I won't get into technicalities. Basically our gov't spending is WAY past the point of returns being diminished and well into it being damaging. This shows how the gov't handles SS trust fund:

http://www.heritage.org/research/socialsecurity/em940.cfm

There is not ONE RED CENT in the SS trust fund, but there are a bunch of IOU's. And its not the only program being handled that way. The only part of those programs that aren't being raided is the amount being paid out in benefits each year right now.

[The Leaper]

You can doubt it all you want, but when a liberal paper like the USA TODAY is saying we are 59 trillion short to pay for liberal social programs, it just might be true.

I'm sure it is true, but like most other Americans under the age of 40, I don't expect to ever see a penny from Social Security. That is why the "shortfall" is overstated...half of that amount probably will never be paid out, and we already realize that.

[bobblehead]

Well Leaper, I guess that is my point. We are being taxed for a benefit we will never see. Now that pisses me off I guess, and I'm the type who can't understand why it doesn't bother anyone else and they keep voting for the same politicians that put us in this mess.

I kept on tape for 4 years (til my VCR ate it) Robert Reich in 1995 talking in an interview about how gov't needed to take control of 401k's because we can't trust corporations to run them. Was this guy friggin kidding!!! He took one or two examples of companies that encouraged their employees to invest in its own stock (ala enron) that went belly up and concluded that the federal gov't needed control of my 401k. He might as well have just quoted LBJ.....there is all that money sitting in 401k's and we could use that money to help fund federal programs (and bankrupt them)

The gov't pig is NEVER satisfied. Here in nevada we had a RINO governer named guinn who SUED the legislature for not voting to raise taxes...more disturbingly he won. We got a massive tax hike that guinn promised would take care of revenue needs for "a long long time". That was 4 years ago, and right now we have a real republican governor who is standing the line on no tax increases while the legislature is screaming about funding shortages and people starving and poor gov't workers possibly losing their 4% automatic raise (one of the only things spared so far)

The gov't pig will spend every dime you send them then cry poverty and take more thru any chanel they can. A poster alluded to breaking the cycle of dependancy in another thread, well let me tell you brother, we have to break the cycle of heading towards socialism unless that is the gov't you desire.

You are accepting that the gov't screwed you and you aren't even pissed, I just don't get that. I am very careful in who I vote for, and I won't ever vote for a candidate that isn't trying to head us in the right direction....often times that leaves me with no one to vote for (take mccain vs. obama for instance). I guess I post on forums like this and shoot out a lot of emails because I want america to care...I want us to elect leaders who send us in the right direction. I want gingrich back, not a hastert who directed 200 million in pork to his district so some land he bought up would inflate in value. I'm sick of the crooks in washington on both sides of the isle, and I'm sick of socialists like pelosi promising me things she won't be around to deliver...she'll only be around to spend the tax dollars collected now.

[texaspackerbacker]

I know what the Law of Diminishing Returns is, and it really doesn't pertain here.

Does it REALLY not occur to you that the ultra-left wing USA Today may have an agenda here--a motivation to skew the truth to the advantage of the libs in an election year?

The bottom line here, Bobblehead, is that this debt is NEVER GOING TO BE RETIRED. It will merely be turned over and turned over ad infinitum. Actually paying it all off would be extremely deleterious.

The "bunch of IOUs" you refer to in the SS trust fund are lttle things like T-Bills, T-Notes, government bonds, etc.--generally considered the most rock solid investments in the world.

Social Security simply is NOT going away. Why? Because it has become politically popular. I remember when I was young, Republicans ranted against Social Security, and were politically excoriated for it. Despite all of the valid criticisms, the program has one overriding positive. It protects people against human nature--the prospect of blowing your future by bad investments or irresponsible spending. Yeah, yeah, I know YOU wouldn't do that, Bobblehead, but way too many people would--and did before the program began. Anyway, there's no way either party is going to let the program die--and with the ability to borrow money so easily, it's not that difficult to maintain.

[bobblehead]

no, when i have 3 sources it doesn't occur to me that one is being disingenuous.

The law of diminishing returns does pertain where gov't spending is concerned. At a certain point the benefit stops and the negatives kick in.

I could be wrong, but the iou's in the ss trust fund aren't bonds or any other form of security. they are letters of what we are short that are not carried on the books, just like the amount we are "borrowing" from medicare and medicaid, and the amounts that gov't employees are accruing in retirement benefits each year but not collecting yet.

I agree that carrying a certain % of gnp as purpetual debt isn't a big deal, but running a yearly deficit funded by new debt and accruing a mountain of unfunded liabilities is much different. I'm gonna convince you this is a problem yet, cuz I honestly believe you are the type to keep looking and researching til the truth hits you in the face. A liberal I would expect to tell me its no big deal and drop it, but I think you might continue to claw away at the issue.

[texaspackerbacker]

The Law of Diminishing Returns in economics has to do with production and productivity. It usually applies to novelty. It's a major stretch to apply it to spending. In addition, the "Law" states that benefit CONTINUES to increase, just at a decreasing rate.

Whatever the debt instruments may be called, they still are backed by the "full faith and credit" of the United States of America--the organization that runs the printing presses.

The liabilities are NOT unfunded. They are funded by government debt instruments--the thing that backs our money supply. And the great majority of years--a strong net effect, the economic growth amount is well over the deficit amount. I believe your own figures (which you had misinterpretted) in an earlier post demonstrated that.

If you are still around 50 years from now, Bobblehead, you will probably still be making the same argument--because the situation will still be the same--a mountain of debt accumulating, but not accumulating as much as the economy is growing.

[bobblehead]

the law states that as you increase it continues to diminish and ultimately stops being a return and becomes a negative.

[texaspackerbacker]

I guess I should have posted the link the last time. As I said, this is applicable almost exclusively to PRODUCTION--with little or no application to spending, government or otherwise. Furthermore, your assertion about benefit stopping and turning negative is wrong. The Law clearly states that the benefits continue to INCREASE, albeit at a decreasing rate.

http://www.answers.com/topic/law-of-diminishing-returns?cat=biz-fin

This is consistent with what I remember from my college days.

[hoosier]

Not sure how the law of diminishing returns became such a hot topic, but wasn't it Malthus the English economist who developed this theory? Seeing as both of you seem to be advocates of this "law" (the debate being over what areas of economics the law applies to), I can't help but wonder if you're also partisans of Malthus' prediction that population growth would eventually outpace societies' production capacities leading to a catastrophic collapse of modern societies.

[texaspackerbacker]

The Malthusian Theory is something else altogether--more social than economic.

You are fairly correct that it states that when population reaches a certain degree of density (no, not the liberal kind of density), that chaos will occur. They have actually demonstrated this with ant colonies or whatever in closed boxes.

The world is a long way from that, as we haven't even seen Malthusian chaos in places like cities of Indian, Bangladesh, etc., where there is a pretty high level of population density.

[bobblehead]

I guess I should have posted the link the last time. As I said, this is applicable almost exclusively to PRODUCTION--with little or no application to spending, government or otherwise. Furthermore, your assertion about benefit stopping and turning negative is wrong. The Law clearly states that the benefits continue to INCREASE, albeit at a decreasing rate.

http://www.answers.com/topic/law-of-diminishing-returns?cat=biz-fin

This is consistent with what I remember from my college days.

You are dead correct, but you are ignoring the COST of input. Suppose you can spend a dollar on seeds for a farm and it gives you 1.50 in return, but as you drop more seed on said land the return diminishes until the crop resulting from the 20th dollar of seeds only gives you 80 cents in return. You have now crossed the zero point. YES, you are still getting a return, but its less than you put in (pick whatever market/factor you want to apply it to, engineers working on a solution, Adding one egineer might increase the speed/result of the outcome by a factor greater than his salary, but by the 10th engineer you are not likely to outweigh the cost of his salary).

So, applying to your gov't theory, yes, spending money by the gov't stimulates the economy almost indefinately, but it has to outweigh the COST of spending and at a certain point it doesn't. We used to model these equations all the time in pricing.

example: I sell widgets for $5 and I have 50 people who want them, revenue, 250. I raise the price to $7 and now 40 people want them. revenue 280. I raise the price to $8 and now 36 people want them, revenue 288. I raise the price to $9 and now 30 people want them. revenue 270, I have passed the point of returns. This isn't perfect, I'm ignoring cost of scale to produce, but you get the idea.

There is a breaking point in all economic models, if I extend your point to absurdity, why not just have the gov't borrow 1 trillion and send it out in stimulus checks, by your arguement we should outgrow the debt.

[Scott Campbell]

We used to model these equations all the time in pricing.

example: I sell widgets for $5 and I have 50 people who want them, revenue, 250. I raise the price to $7 and now 40 people want them. revenue 280. I raise the price to $8 and now 36 people want them, revenue 288. I raise the price to $9 and now 30 people want them. revenue 270, I have passed the point of returns. This isn't perfect, I'm ignoring cost of scale to produce, but you get the idea.


That's price elasticity, which is different than the law of diminishing returns.

[bobblehead]

yes, I said we used the MODEL in pricing, i didn't say it was the same technical term. The idea of a price increase losing its effective dollar return is the same idea, but the seeding of the land was ACTUAL law of diminishing returns.

When you run the equations they graph out pretty much the same way where you reach a breaking point, I used the pricing example to try and demonstrate another way benefits decrease as you push the envelope (because I am comparing it to gov't spending.)

[bobblehead]

The Law of Diminishing Returns in economics has to do with production and productivity. It usually applies to novelty. It's a major stretch to apply it to spending. In addition, the "Law" states that benefit CONTINUES to increase, just at a decreasing rate.

Whatever the debt instruments may be called, they still are backed by the "full faith and credit" of the United States of America--the organization that runs the printing presses.

The liabilities are NOT unfunded. They are funded by government debt instruments--the thing that backs our money supply. And the great majority of years--a strong net effect, the economic growth amount is well over the deficit amount. I believe your own figures (which you had misinterpretted) in an earlier post demonstrated that.

If you are still around 50 years from now, Bobblehead, you will probably still be making the same argument--because the situation will still be the same--a mountain of debt accumulating, but not accumulating as much as the economy is growing.

One last point on this...I agree, the situation will be the same...we will be raising gov't spending and lowering benefits of having a gov't. In 50 years if we do nothing other than continue to fund thru debt we will be screwed. We ARE doing things now to curb it, like cut benefits, raise the age for SS, tax SS benefits ect. Medicare is cutting out certain services/procedures, limiting tests allowed. Ultimately gov't employees who are working and assuming certain promised benefits will be told sorry, you will only recieve half your pension, and instead of the health plan we promised you we are putting you into the medicare group.

Now, I admitted above that I don't have exact numbers as a percent of GNP, but I would bet that Gov't spending, deficit, and standing debt have all increased as a percent of GNP under bush, and I have to believe thats not a good trend, cuz when it hits 100% then we are socialist.

[bobblehead]

Not sure how the law of diminishing returns became such a hot topic, but wasn't it Malthus the English economist who developed this theory? Seeing as both of you seem to be advocates of this "law" (the debate being over what areas of economics the law applies to), I can't help but wonder if you're also partisans of Malthus' prediction that population growth would eventually outpace societies' production capacities leading to a catastrophic collapse of modern societies.

assuming that technology fails to keep up with population growth it will indeed collapse us, but that is a big assumption. I have posted on another thread that, who I consider the greatest technological mind of our time, Ray Kurzweil has predicted that within 5 years solar will be cost competitive and indeed surpass that of "dirty" power with only nuclear being cheaper. he says within 20 years the EARTH will be on solar power and off other forms. These kind of things will allow us to be comfortable at very HIGH populations with space and crowding being the restrictor.

Remember there is a big difference between a prediction about production capacities and a proveable law like diminishing returns.

[MJZiggy]

Just remember that while solar is wonderful and costs only the equipment used to collect the energy, it does still require space even with Fresnel lenses.

[Scott Campbell]

Just remember that while solar is wonderful and costs only the equipment used to collect the energy, it does still require space even with Fresnel lenses.


Then there's the batteries, and replacement batteries, and disposing of batteries.

[Tyrone Bigguns]

Just remember that while solar is wonderful and costs only the equipment used to collect the energy, it does still require space even with Fresnel lenses.

When people talk about solar, they aren't talking about it the way you are..they are banking on solar thermal.

[MJZiggy]

You mean like this. Anyone have eSolar stock?

http://news.cnet.com/8301-11128_3-9959107-54.html

[Tyrone Bigguns]

You mean like this. Anyone have eSolar stock?

http://news.cnet.com/8301-11128_3-9959107-54.html

Yes. Exactly.

I posted about this to Partail...which he of course dismissed.

The plans are already out there for a massive solar system in NM...would power the whole country.

There is also a ton of windpower to be harvested from the midwest.

In order for this to happen we need to get our national grid together..similar to what occured with the internet.

Interesting fact, one of the landfills in/outside of L.A. (think it is Puented Hills) produces enough methane which is then burned to create power..enough to power 70K homes.

[texaspackerbacker]

Nice to see the positive posting.

If indeed, solar does become that feasible that soon, it will alleviate a lot of the world's problems of all kinds. On a political level, we mainly need to make sure that the forces of evil who favor tyranny, depravity, and ignorance are kept down long enough for technology to flourish that way.

The prosperity and comfort brought on by cheap easy energy, combined with freedom and representative government is a formula for the kind of world conservatives and liberals both would like to see--but that liberals have such a horribly flawed way of enabling.

Economically, it's my contention that doing nothing different--continuing the use of debt to keep things afloat would work very well--no reason why it shouldn't. If, however, cheap energy brings the prospect of making life even better with less government spending, fine. I think we could survive a mild deflationary trend.

[bobblehead]

I do accept the reality that technology is on the verge of a boom we don't quite comprehend in which case life as we know it will change drastically and any problems I am forseeing, won't be a very big deal...as a matter of fact I am hoping very much for that, but I have seen many cases of corrupt legislature, and misplaced morality holding down advances. I think that we will blow right past those issues, but in the meantimes I like to debate so....what the hey. I also think when I talk about defeating aging and illness within 20 years people think I'm plum crazy so I avoid the issue except through anonymity :)

[Freak Out]

Quiz time.....Anyone know what our national (DOE) policy is in regards to solar energy?

[Freak Out]

McCain Raises Concerns About Subsidies for Solar Power

Posted By Mary Lu Carnevale On May 13, 2008 @ 8:59 pm In Campaign 2008 |

Laura Meckler and Stephen Power report on the presidential race.

Sen. John McCain made clear today that he is not comfortable with subsidies for solar power, though he has supported incentives for nuclear power plants and thinks more federal support is needed to encourage the industry.

At a roundtable conducted in the foggy foothills of the Cascade Mountains in North Bend, Wash., McCain listened to the chief executive of REI, the outdoor recreation and clothing cooperative, explain what her company is doing to minimize its impact on the climate. He asked her a simple question: “What do you want me to do?”

Sally Jewel replied, “It’s a great question,” and went on to explain that REI plans to open 10 solar-powered stores in Arizona, California and Oregon (in sunnier markets, she noted, than the rain-soaked one he was in at the moment). The problem, she said, is there are no federal incentives to help defray the costs.

“There isn’t anything significant on the federal side to help us make the right decisions,” she said. “We’re trying to do the right thing without really any incentives.”

McCain replied that he preferred for the federal government to invest in research and development, not subsidies.

“I’m a little wary–I have to give you straight talk–about government subsidies,” he said. He cited his long-time opposition to ethanol subsidies, which have helped push up the price of corn and increase the price of food.

“When government jumps in and distorts the market, then there’s unintended consequences as well as intended,” he said.

He said over-subsidization of the solar industry in the 1970s led to “some pretty shoddy material.”

But he does support help for nuclear power plants, which he hails as a clean technology that can help reduce carbon emissions. He told reporters at a news conference that a pending Senate bill on climate change, which would establish industry limits on emissions that he favors, needs to add more help for nuclear power.

“It doesn’t go far enough as far as nuclear power is concerned in my estimation,” he said.

An aide to the Arizona senator said Tuesday that McCain hasn’t decided exactly what form of support is needed, but that it likely will be “consistent with” past measures he has supported that would have directed hundreds of millions of dollars to the construction of new nuclear plants.

[bobblehead]

You mean like this. Anyone have eSolar stock?

http://news.cnet.com/8301-11128_3-9959107-54.html

Yes. Exactly.

I posted about this to Partail...which he of course dismissed.

The plans are already out there for a massive solar system in NM...would power the whole country.

There is also a ton of windpower to be harvested from the midwest.

In order for this to happen we need to get our national grid together..similar to what occured with the internet.

Interesting fact, one of the landfills in/outside of L.A. (think it is Puented Hills) produces enough methane which is then burned to create power..enough to power 70K homes.

Another case of me agreeing with tyrone...I gotta rethink this :) Honestly though, this is another case of the free market solving a problem. All the gov't subsidies to companies that didn't do shit to advance the technology and its free market that is coming up with the real answers.

[Freak Out]

You mean like this. Anyone have eSolar stock?

http://news.cnet.com/8301-11128_3-9959107-54.html

Yes. Exactly.

I posted about this to Partail...which he of course dismissed.

The plans are already out there for a massive solar system in NM...would power the whole country.

There is also a ton of windpower to be harvested from the midwest.

In order for this to happen we need to get our national grid together..similar to what occured with the internet.

Interesting fact, one of the landfills in/outside of L.A. (think it is Puented Hills) produces enough methane which is then burned to create power..enough to power 70K homes.

Another case of me agreeing with tyrone...I gotta rethink this :) Honestly though, this is another case of the free market solving a problem. All the gov't subsidies to companies that didn't do shit to advance the technology and its free market that is coming up with the real answers.

The State of California mandated the change..and the State offers some pretty substantial incentives to go solar.

[texaspackerbacker]

I do accept the reality that technology is on the verge of a boom we don't quite comprehend in which case life as we know it will change drastically and any problems I am forseeing, won't be a very big deal...as a matter of fact I am hoping very much for that, but I have seen many cases of corrupt legislature, and misplaced morality holding down advances. I think that we will blow right past those issues, but in the meantimes I like to debate so....what the hey. I also think when I talk about defeating aging and illness within 20 years people think I'm plum crazy so I avoid the issue except through anonymity :)

Did you mean "do accept"? Or did you leave out a "not"?

I'm not up enough on the technology to do much more than take it on faith what was said.

What i will say for certain, though, is that cheap renewable energy, if in fact, it becomes available, will be a virtual panacea for many of the world's problems--that is provided America has not fallen from dominance by that time, leaving the world in the hands of the purveyors of tyranny, ignorance, poverty, genocide, etc.

THAT could easily be the Obama legacy, based on all of his horrendous stated positions--if in fact, he gets in office.

Not only would America suffer, but the whole freedom-loving world.

Let's think positive, though. Obama goes down to defeat; America survives/stays dominant; Cheap energy becomes reality; And the world benefits.

[Tyrone Bigguns]

You mean like this. Anyone have eSolar stock?

http://news.cnet.com/8301-11128_3-9959107-54.html

Yes. Exactly.

I posted about this to Partail...which he of course dismissed.

The plans are already out there for a massive solar system in NM...would power the whole country.

There is also a ton of windpower to be harvested from the midwest.

In order for this to happen we need to get our national grid together..similar to what occured with the internet.

Interesting fact, one of the landfills in/outside of L.A. (think it is Puented Hills) produces enough methane which is then burned to create power..enough to power 70K homes.

Another case of me agreeing with tyrone...I gotta rethink this :) Honestly though, this is another case of the free market solving a problem. All the gov't subsidies to companies that didn't do shit to advance the technology and its free market that is coming up with the real answers.

The dark side is strong within you young bobblehead.

Bobblehead, i am your father! :wink: