Don't look now, but Congress just raised your taxes. How can that be? Didn't they just approve a bill that will keep Bush-era tax cuts in place, lower the inheritance tax, and lower the Social Security tax for a year?
Call it the "debt tax." Whenever the federal government enacts a bill that it does not pay for, we go further into debt -- in this case $900 billion. When you buy something you can't afford, you borrow the money and pay interest on what you borrow. The interest the government has to pay on its debt has to come from you, the taxpayer, and thus it acts just like a tax -- your tax dollars pay it.
In 1940, the federal government paid $10.3 billion in interest on the debt, $78 for every man, woman and child in America at the time. In 1980, the government paid $111.6 billion in interest, or $491 for every American. Fast-forward to 2010, where the comparative figures were $168.4 billion and $545. Chump change. According to the President's Budget for 2011, interest on the debt will be $474 billion by 2015, a per capita cost of $1,454. In short, the "debt tax" will increase nearly 300 percent in just five years.
If this sounds like "so what, I don't actually have to pay more," think about it another way. If the federal government had no debt in 2015, it could lower your taxes by $1,458. For a family of four, that would amount to a tax bill nearly $6,000 less.
According to the bipartisan Congressional Budget Office (CBO, in 2020, when net interest on the debt is projected to cost $937 billion, that net interest will be 14 percent of federal spending, nearly as much as we will spend on Defense (15 percent) and Medicare (17%). Oh, and the per capita cost of the interest will by then be $2,789.
In 1985, the entire federal budget was $946 billion. By 2020, based on CBO's estimates, we'll pay nearly that just in interest. In short, the "debt tax" in 2020 will equal what the federal budget was in 1985.
One more thing. When you pay the debt tax, you might at least take comfort in the fact that your tax dollars are doing back to good old Uncle Sam, right? Well, only partially. The U.S. government owes nearly a third of its debt to foreign creditors (over $4 trillion). So, roughly 30 cents of each "debt tax" dollar goes to a list of countries that includes China (our biggest creditor by dollar volume), Japan, the U.K, Russia, the oil exporting countries of the Middle East and Brazil. Isn't it comforting to know that our "debt tax" dollars are financing the growth of our competitors?
On the brighter side of all this, you might think: well, Republicans, Democrats, and the White House finally stopped shouting at each other and agreed on something. They compromised. But how hard is it really to compromise on spending more money? Maybe each bill coming before Congress should have to report what impact it will have on the "debt tax."
http://moslereconomics.com/mandatory-readings/
If we aren't very fortunate, we may end up with the interest rates we must pay to sell US bonds and Treasury notes going back to where they were in the 1980s, when ten year treasuries were yielding 14%. That would give us an ANNUAL debt service of $1.96 Trillion based upon the current debt of nearly $14trillion.
And, bond rates are whatever the fed decides they are going to be. Although they mainly target overnights, they have the power to set any term they wish.
The only option for those who wish to receive interest on their reserves is to accept what we offer or essentially give the government an interest free loan. Either way it's all unnecessary since we don't have a convertible currency.
Bond rates are whatever the BUYER decides they are going to be. The bond vigilantes ultimately will determine the rates/
My problem with the article is this, people and governments, dump debt when they can. That way they got something for nothing but people up the line got paid. Dump a department store credit account and the manufactures were paid, but the store loses and they cut jobs.
Buy American and shop locally. Don't cut government spending, just reorganize it.
The best way to get out of debt is through growth. Which requires a return to free market fundamentals, less biased regulation, and smaller government power to tax and redistribute. The result will be more companies investing and growing, a broadened tax base that results in more stable tax revenue, and less rent seeking special interests that require tariff protection or economic subsidies or simple bail outs and straight forward pay outs. This reduction in government entitlements to both the rich and the poor, while not only fair, would reduce the burden of government that is weighing down both the individual and corporate tax payer.
You have a good point in terms of cutting defense (in addition to reforming Medicare, Soc Sec, and other rent seeking welfare programs). I have no problem cutting defense, especially as it relates to foreign countries. If they want our protection let them pay for it and let us make a respectable profit. Highly unlikely, so let’s reduce that to a bare minimum. We do not get any love for being the world’s policeman and are seen as a bully by much of the world. Not worth it.
Kai
http://moslereconomics.com/mandatory-readings/
When 47 percent of all people get money from the IRS in Refundable credits. And the richer off pay a higher total and total percentage, and you believe that is unfair do Americans have a problem.
Fair? Can you express that in a total amount? Or a percentage?
Fair to everyone else is paying the same amount to the govt or the same percentage?
Fair to you means we take from the people who work and give to those that don't? That's not going to work.
Unfortunately, the "conservative" party has engaged in a spending binge for the last 30 years while simultaneously cutting taxes. As a result federal debt rose from $900 billion in 1980 to $14.3 trillion. That's some serious money. What's worse is our economy is in a fragile state and could slide from recession into depression. Thus, we can't do much about the debt until we get the economy going. In fact we need more deficit spending to really jump start the economy.
Nonetheless, where big cuts in federal spending makes sense is mainly the defense budget. Since we spend more than the rest of the planet combined we could slash that to the level of our allies and lose nothing. We should stop being the world's cop and eliminate overseas spending as it does us no good economically. Secondly, I would down-size the Dept of Homeland Security. Big waste of time. The best thing short term redirect the money to domestic spending. In the long run once the economy gets going we should amortize our debt (and future costs of Medicare) and start paying down that monsterous debt.
They are both to blame.
Now where it gets plainly out of control is if one throws in Supplemental Security Income.
SSI pays $8,088 per year for each “disabled” family member. A person can be deemed “disabled” if thy are totally lacking in the cultural and educational skills needed to be employable in the workforce.
If you add $24,262 a year for three disability checks, the lowest paid welfare family would now have far more take-home income than the $60,000-a-year family.
http://www.zerohedge.com/article/entitlement-america-head-household-making-minimum-wage-has-more-disposable-income-family-mak
I agree that example the poster gives is true - in a vanishingly small percentage of cases and so couldn't be used to prove a pattern. The attempt to do it is dishonest at the least.
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If they have to be lacking cultural and educational skills needed to be employable in the workforce, wouldn't that make them adults.
If they are adults, then it really can't be meet the definition of a family unit.
The FED is an issuer of debt. It won't wipe out debt. It might buy the debt from the banks and have the taxpayers pay for it.
Tax the rich is getting old. Politicians have a problem. They will always spend more and more money. The answer is not giving them more.
WTF is "Low Tax Policy"?