[In the midst of the presidential campaign of 2012, I received an email containing this comment and video. Below it is an exchange of emails on the subject.]
If you watch nothing else today….please watch this short illustration lesson. This is a non-partisan video produced by an accountant , Hal Mason, retired after 27 years with IBM. He looks at the budget, its revenues and expenses, and very simply illustrates the problem. Amazingly, we get all the media talking heads blathering and shouting for hours and never get clarity. This guy provides all the clarity you need in just a of couple minutes.
Click the link below to view the video: United States Budget Dilemma – YouTube
And here is the conversation that ensued:
Sent: Wednesday, September 19, 2012 9:55 AM
Cc: S; K
Subject: Re: Why we can’t balance the federal budget
Well, here are a few beliefs and opinions, in no particular order:
Most of his data is correct, but he reaches some VERY strange conclusions.
Social Security and Medicare, for example, are handicapped by the $125,000 salary cap on payroll taxes. For example, the Port of Seattle Commissioner makes $364,000 and sits on the boards of several corporations. He makes over $600,000 a year, yet only pays SS and Medicare deductions on $125,000. I don’t think that’s really fair, do you? Raising the cap, or eliminating it altogether, would get MANY MANY more people to pay into the system. Social Security and Medicare problem solved.
If we decide we don’t want the government in the insurance business – “Obamacare” – let’s get the government out of ALL insurance businesses, and let “market forces” be in control. So no Federal Flood Insurance, no Federal Crop Insurance, no Federal Deposit Insurance (FDIC), no government underwriting insurance for FEMA, oil spills, etc. Where would people live, bank, grow food, if the government didn’t insure stuff?
Mr. Munson’s mention of the US losing its AAA credit rating is VERY misleading. The credit agencies didn’t take that action when the government’s debt became as big as it is. If you remember, the credit rating was lowered last August, when the Republicans in the House came within a few hours of not raising the debt limit, causing the financial markets to get VERY nervous about defaulting on interest payments to bondholders (people who have loaned money to the US – like China and Great Britain). The change in rating was because the credit agency lost a little faith that the government could work through its problems, NOT because the debt was high. The debt started to soar during Reagan’s administration, and increased rapidly after going to war in Iraq and Afghanistan while borrowing the money to do so (thank you W.) Yet the credit agencies maintained the AAA rating because the American government was continuing to function fairly normally, in a bipartisan way, to solve problems by making compromises.
Regarding the general question of the “balanced budget”: What’s so important?? Our stock market is nearing an all-time high, and our long-term interest rates are at historic lows. If “the markets” were concerned about an imbalanced budget and high debt, our stock market would be a shambles, and we’d have 10% interest. But the markets AREN’T worried. The US system is still the most attractive for investors, even with interest rates so low. It’s VERY safe because of our legal system and the transparency of the accounting rules (GAAP). There’s no place else in the world that is as good an investment place as the US. The “markets” prove this. The REAL reason there is such a push for a “balanced budget” is because of a Republican goal going back 50 years or more. What is the now-infamous line?? “Shrink the government until you can get your hands around its neck, then choke it to death.” The “balanced budget” frenzy is really about shrinking the size of government, which translates to less regulation on big business. So less regulation on anything the Koch Brothers and all the other multi-zillionaires that are contributing to Romney’s campaign. Less mining safety, less clean air and water regulations, less restrictions on dumping toxic mining and fracking wastes into rivers, less protections from catastrophic oil spills, less workplace safety regulations, less restrictions on questionable banking/investing/auditing/consulting deals.
And while I’m on the subject of less government, let me ask: If Republicans REALLY want less government, less regulation, more “freedom”, and promoting personal choice and responsibility, then PLEASE PLEASE PLEASE TELL ME – Why do they want to tell people who to marry, who has to have a child when they’re clearly not emotionally, financially or even physically ready to be a parent, and what god to pray to? What part of LEAVE ME ALONE don’t they understand??!!
Sent: Wednesday, September 19, 2012 10:17 AM
To: ‘Ira Seigel’
Cc: S; K
Subject: RE: Why we can’t balance the federal budget
I didn’t hear Munson reach any conclusions, other than fixing the imbalance is critical. He just reported what was on the proposed (!) budget. But you have some good points.
I think the market is, like politics, focused on the short term. But one indication that investors are hedging, or taking a more cautious approach to risk, is the price of gold. I have moved some funds into gold, too.
And I agree with you about the seeming Republican contradiction about family planning, which is my major disagreement with their platform. Thankfully, any changes in this area, as in most other issues on either candidate’s list of “will do if elected”, has to appear on his desk as a bill from Congress. It is just the reverse for foreign policy since the president (through the State Dept) negotiates treaties and then sends them to Congress for ratification.
However, the amount of govt regulation on small business is onerous. I hear this from my customers. When they grow to about 10 employees, the paperwork requirements from local, state and fed govts grows to become a time-consuming problem. Besides raising their costs to do business (overhead), I guess one way to look at this is that it often creates just enough more work to justify hiring another employee! Thankfully, being a one-man shop, I have very little additional work from this.
Sent: Wednesday, September 19, 2012 11:10 AM
Cc: S; K
Subject: Re: Why we can’t balance the federal budget
I agree that it’s very complex, if you’re a small business owner, to hire and maintain employees. Tax paperwork, insurance, etc., makes it very burdensome for a small-business to hire. Maybe it would be far simpler if health care was not tied to your work! Why should it be something that has to be provided by business? I’ve never understood this. The ONLY reason that makes sense is that, because you’re in a “pool” of people (employees), your insurance rate goes down, rather than buying it on your own, like I do or like Kim does (Blue Cross, Regence, Group Health). Which is basically why the GOVERNMENT is trying to create a HUGE pool of people, in order to lower EVERYONE’s rates, independent and regardless of your employment status. And so if you want to change jobs, or move or if you get laid off, your health insurance isn’t at risk.
Regarding “hedging”: I too bought some gold mutual funds a couple of years ago. They’re not doing nearly so well now as they did early in the recession. The reason that businesses are “hedging” – delaying hiring and capital investments and basically helping to prolong the recession – is because of the uncertainty in the economy. That is to say, in January, when the “fiscal cliff” is reached, what’s going to happen? If Congress – both parties – could work together, compromise, and come up with long-term budges and tax clarity, businesses would have more confidence in the future and start investing in themselves again, rather than just hoarding their cash. Example: late in the Clinton administration, he issued a series of rulings about lowering mercury into the water supplies, and instructing power plants to add “scrubbers” to their exhausts, to help improve air quality. What did the power industry do? They delayed and lobbied and donated – and finally helped to get Bush elected, so that they wouldn’t have to comply. They’re doing the same thing now – with banking regulations, for example – that would provide huge benefits and would get the economy going again, if they would just stop trying to buy the next election.
Regarding the Republican “agenda”: during the last election cycle, the Republicans said they wanted to have a “laser-focus” on jobs and the economy. But when Republicans were elected in large numbers, did you notice what the first bills to be introduced were? In state after state, the first bills introduced were about abortion and gay marriage and Planned Parenthood and putting the Ten Commandments in every courtroom and a Christmas tree in front of every state capitol. THAT’S the real agenda of the current Republican party, which has been hijacked by Ralph Reed and the Christian Coalition. And that idiot Grover Norquist – but that’s another story…
[To say that Richard Lugar wasn’t conservative enough?? To say that Susan Collins wasn’t conservative enough? What were these people thinking??]
Regarding Munson’s video – he presents lots of data and concludes that the government is broken. He concludes that Social Security and Medicare will bankrupt the country. He concludes that we’ll turn into a “mega-Greece”. Lots of other conclusions, too, all suspect. IMO.