Category: Budget

Fear is the mind killer

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It’s a quote from Dune, I highly recommend reading the books or watching the films.  Fear is the name of the game in politics anymore.  See that guy over there, he’s going to take away something valuable to you, and the only way to protect it is to vote for me.  It’s played by both sides of the aisle, and the application of fear in campaigns is well know, well documents, and flat-out nonsensical at times.

Why do I bring this up?  Fear goes both ways.  We’re afraid of the pending failure of our government to be able to pay its bills, so the President and the dutiful denizens of the left in congress roll out additional taxes and new spending to engage the economy in what could be the most over-estimated recovery that has yet to happen.

Meanwhile there is the argument from the President that the Deficit is going down (as a side now, each projected pseudo-budget that has been touted out for the last five years has been a ‘deficit-reducing’ budget) and yet we’ve tacked on $6 trillion to the national debt.  So, there’s our fear.  We’re deep in the hole and we need money.  So, how do we get this money.  We limit how much goes into Roth IRA’s.  It’s a short story put up by The Hill pointing out that the super wealthy have been squirreling away money in Roth IRAs, which they can’t touch until they’re 59 and a half without some heavy penalties, and in a desperate attempt to raise some additional coin, the government thinks that the amount of dough saved in those accounts shouldn’t exceed a specified amount.

I understand the logic.  There’s money there, and, after pouring through more pages of the IRS website than I care to do ever again, it turns out you pay an excise tax of 6% on excessive donations, and early withdrawals are taxed at rate, and then 10% more on top (again if withdrawn before you are 59 and a half).  So, in all that, there’s money.  How much money?  I’m not certain the numbers are solid, but according to the article from The Hill roughly $9 billion over the next decade.  Yup, over the next decade they’d square away 0.005% of last year’s deficit.

Solid plan there.

Nominally, it’s going to take work, and I hope to god they’re working on it because right now I don’t think it’d pay for the paper it’s being printed on.

The other side of the sword is the delivery method.  Like I said, we’re talking about fear here, and the need to make people afraid.  Why are we talking about this?  Because it’s scary.  Because the Government is going after our retirement savings, or so the Drudge Report would have you believe.

If you hit the Drudge Report over the weekend you would have seen the hyperlink to “Obama budget targets retirement accounts…”.  Rolling off the recent move by the EU to soak the owners of money laden accounts in the national bank of Cyprus, there is an expectation of the government in the United States doing something similar to ward off a fiscal boogeyman (don’t get me wrong, we have serious money problems) but to snag 40-60% of the value of all accounts that hold more than $100,000…can’t happen, won’t happen, and will break the financial system faster than the housing bubble of 2008.

Now, rank and file readers aren’t expecting this.  Most folks are pretty certain that their money is safe, and it is.  The Cyprus situation was a state run and controlled bank, we don’t have that in the US. We have a fed that feeds into banks, but those accounts are ours, and the money comes out of the hides of the bank, not out of Uncle Sam.  However, it’s still a scary thought.  It’s in red, of all colors, against all the black text.  It’s important.  It’s also inaccurate based on the text of the article linked.  Not wholly inaccurate, but omits the focus on the wealthy aspect of the donors being targeted.

So, boogeymen abound on both sides, and what do we have.  People worried that their retirement funds are now the target of a government siege on savings to slake their ever-growing thirst for funds to toss at social projects, and politicians who are offering weak tea solutions to monumental budgetary issues.  This is not a good-get.  This isn’t even a good story.  It’s about as bottom of the barrel as you can get when it comes to dialogue.  There is no genuine interest in doing what is right, just in making sure that someone is scare, and what they are hoping is that someone is you.

The ever growing elephant in the room

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What is $474.15 Billion dollars?

The fiscal cliff looms in the distance like a funnel cloud on the hard-packed plains of Texas.  The key difference is we can avoid that wicked looking mess coming our way.  Functionally, this is a historic opportunity, wrapped in gilt and handed to the parties with the same bows and trappings of the holiday preceding the impending fluster cluck that is about to go down.  That gift; a moment to finally stop bullshitting and come together to get this nation on a path to a balanced budget, an aim at reducing the national debt, and reigning in the last decade and change of madcap spending that has gone on.

Those hoping for this know better.  The only thing we, the American public, will get out of this deal is coal in our stockings which will be summarily taken away because it is neither green nor ours to use as an energy resource.

The New York Times has a fantastic Infographic available to the public where you can see firsthand what grew, what shrank, and what is owed to who and where.  I will be frank, if the President or Congress is serious about cutting the deficit and balancing the budget then all the programs they swore to protect must share in some of the bloodletting.

Medicare and Medicaid account for nearly one-third of the budget by itself.  Toss Social Security into the mix and over half the budget is consumed by these two programs alone.  Defense spending.  It rings in, for the first time, lower than the cost of Social Security, and is quickly being outpaced by the interest on the national debt.

This brings me to my beginning question; what is $474.15 billion dollars?  That number is what is owed in interest on the national debt.

It is staggering to look at, and,  mind you, that is the interest.  Not some credit card minimum where part of what you pay hits the principle and we will ever so slowly knock it down.  Nay good reader, this is pure interest without a dime set to the principle.  I’ll be honest, that would be the first number I would be set to tackle for that number will be what kills us.

If the President’s moratorium on discretionary spending (which would freeze the large majority of defense spending but leave social security and Medicare/Medicaid alone) goes through then we’ve only slowed the train down, but it will chug along.  Mayhaps you can knock out some of that principle.  Hold back the rising tides, but the moratorium cannot last forever, and if it is not adapted to, the glut of costs that will come cascading down and crush any gains made.

So, while our elected officials piddle away the hours playing games of imaginary chicken and peek-a-boo with the press, handing out reports of  “nothing to see here” we are getting buried.  The interest grows, and will eclipse the costs of social security and Medicare/Medicaid if left untouched, all the while pledges are being made to not raise taxes on anyone and no programs will be cut.  Looking at the reality on paper/webpage and listening to the news brings two conclusions to mind.  Either those in power want this world to burn for the sake of petty feuds and broken ideologies, or they are, much to our chagrin, monumentally clueless as to what they have brought down upon all of us.  It will come to a day when that cost, just to cover the interest being made on the debt, will choke us out, and we will be forced to cut to maintain or default.  Best to do them now, with flexibility and foresight on our side than a later time when we must cut because there is no other option.  When a monthly social security check is short $21 a month for living expenses versus hundreds of dollars short because there isn’t any money left to paid those who are owed.  Petty promises and pledges won’t mean a damn thing then, and, to be frank, shouldn’t mean a damn thing now.