The Reality of Our Economic Situation

[Steve Stuck]

When it comes to economics and markets, they have no feelings. The above picture is reality and it will start showing it effects of our system very soon. Our nation and current society has a belief that government printing money will help create jobs. The society has deemed government worthy enough to provide benefits to it citizens called entitlement programs (social security, healthcare, welfare, financial aid for college, pension plans). What will be the effects of money growth, debt and a growing government? Next will be the current budget deficits that will grow only bigger. This then makes investing in our country much more hostile and forces us into borrowing or just money creation that has no real value to it.

What is the solution? There is a lot to talk about how to solve this but I will make a few key points.

Government Growth Has To Stop- Government does not create jobs, it creates liabilities for its taxpayers. These liabilities create future debt for many generations to pay off. Government spending period is really out of control and its budget needs to be capped for many decades in order for repair to start. Next, you need to cut out programs that will effect many people, but the future plus side of it is a stronger economy. All forms of government need a major structural change and that means loss of jobs by many people. Remember something, taxpayers also outweigh government jobs. That is a major philosophy difference between me and other people, it is We The People and not We The Government.

Here some programs that could be cut or reshaped. Farm subsidies have to go. We are paying people not to plant on their land. How absurd this is and does nothing for our country. Department of Education is very bloated and serves no real purpose since the States can take care of their education needs. Department of Defense has many overlapping jobs outside of military in itself. Many cuts can be made here while pulling our military out of posts that have outserved their purpose. Immigration Policy is bankrupting states and eating our tax revenue. Need I say more about leaving the front door open so our neighbors can eat our food. Hospitals, schools, welfare and many other services are used by people here illegally and it has to stop. Major reform in immigration policy has to take place.

All agencies within the government must go under a slash in spending. Many will fight this because once government stops providing groups of people something, it is very hard to take it back. Same can be said for regulations.

Entitlement Spending Social Security, Medicare and Medicaid are in financial ruins. Current total debt of these programs by 2040 is $53 Trillion dollars. Each year they eat more and more into our tax revenue collected. Social security is broke and whatever revenue collected and it's surplus gets borrowed against. This is by law and written into our law books. Once these expenditures start eating up more of our budget, then drastic cuts will be made to retirement paychecks one day, causing some massive civil unrest. Medicare and Medicaid cause much strain on our system in healthcare by creating a false demand for services.

One solution to our social security problem is letting my generation go to private accounts and lift the burden off employers to contributions. Disagree with me all you want, but that paycheck is my property and I will best invest it compared to your local Congressman. They are doing a terrible job of it right now, so why should I really trust them. Medicare and Medicaid must have stricter standards on them and basically flush people off the rolls that don't need to be on them. WIll people feelings be hurt? Who cares. We are talking about saving our financial system compared to some of the people who have manipulated the system for decades and got us into this debt.

TAXES A new survey just came out and showed the United States the most taxed country per citizen in the entire world. Our tax code is over 70,000 pages long and causes citizens and business much financial strain every year in working with it. The tax code also is making business growth leave our country. It costs citizens and business an estimated $500 Billion dollars a year just to comply with our current tax code. Businesses also have to estimate what their tax liability will be whenever they expand their business. Corporate taxes are not taxes on business, no taxes on business is. They just hide it in the costs of their goods and services.

Payroll taxes are a double taxation on business owners. Remember, 80% of all business's in the US are small businesses. These people are getting taxed 6.2% on what they have to match of the employees 6.2% for social security. This brings down an employees hourly wage and taxes business revenue that then gets taxed again when the employee pays themselves. What a mess.

Federal Income Taxes are only paid by 60% of all taxpayers. This is a hotly debated subject within our country and honestly, this is silly. We have let government create so many tax write offs for one income class while the others are forced to pay it or we just run federal deficits. One social aspect of this topic is wealth envy. Taking money from some to pay off the others. How is this beneficial for our society? This creates class warfare and divides the country even more.

Solution to this is a total reform to our tax code. My answer is either a national sales tax or we completely get rid of tax write offs and go with a 15% income tax on everyone. Tax write offs are very draconian on society. One tax write off that is absurd is the mortgage interest write off. We basically pay people to live in homes. We give people write offs to have children. When does it stop?

If you reform our tax code (especially a national sales tax) many things will happen. First, the government loses power and the citizens regain it through having more money. They either will spend it or save it. Debt would start being paid off and bank accounts would go up. The effect of this will be lower interest rates on things like vehicles and homes. The value of the dollar would be more solid from an economy that is saving. Another aspect is business would relocate to the US in massive droves. Investment money sitting overseas would roll back in the tune of Trillions of dollars. Job growth would be the largest this country has ever seen by lifting taxation burdens off business. Now addressing government debt, government would be forced into a position if they wanted to raise taxes, it would have to be on everyone and not just one group of wage earners.

I do not foresee any of these changes within the next 2 years. After that, much will be discussed because some serious economic hardship will be facing our economy. My biggest fear is massive inflation in the next two years. Maybe we need to punched hard in order for us to wake up. I just hope it doesn't knock us out.

[Mark Howard]

Excellent points Steve. We absolutely need a revolution in the USA to save us from ourselves.
Can anybody believe that we may have a single year with a trillion dollar deficit?

[Mark Apple]

I like the Fair Tax Plan as well. I think several IN congressmen, including Dan Burton support it. I think Huckabee was the only presidential candidate that supports the Fair Tax Plan.

[Steve Stuck]

Thanks, here is one from 1995 with Dr. Thomas Sowell

http://www.charlierose.com/guest/view/4830

[Mark R Platt]

if you have 55 minutes. check out Warren Buffett interview with Charlie Rose.

http://www.charlierose.com/view/interview/8497

[Scott Emmett]

I like the Fair Tax Book. Good stuff

[Steve Stuck]

shadowstats.com, Dr. Thomas Sowell writings (he is an economist), current budget reports of government papers from the Budget Office, Peter G. Peterson Foundation, The FairTax book....................these all have quoted sources

You can study government money growth without backing and it effects through many financial writings.

[Duke Brown]

I agree with many of your comments and solutions. Germany tried the whole print more money concept and it didn't work for them. We have exceeded the Roman Empire for the longest running democracy in history. It is a great run that many of us would like to see continue but until we level the playing field by a flat sales tax system with entitlements for only to the truly needy ( Widows, physically handicapped and orphans ) then we are on an increasingly slippery slope. Government should govern and let busisness's do the business. As you said no jubgle is with out loss and life is a jungle.

[Scott Emmett]

I am in complete agreement with your assessments and proposals. Very well written. Maybe you ought to send it to our representatives in lala land.

The sad truth is very little, if any, of your proposals will ever make it off of paper. As long as we have entrenched, corrupt, career politicians, we will never see an end to the pandering for votes that brought us to this debacle. We are in desperate need of terms limits on every office at every level. Until that happens, we are stuck with the current crop of (mostly) thieving crooks that occupy many of our elected positions. There are exceptions but darn few and shrinking.