Promised Change America Elected Socialism
Government Finance 101 a basic primer to your government indebtedness
5.13.2007
Dear James and Olivia,
You know when I have anything I feel is really worth your hearing, I write a letter so you can read it over until it sinks in. So I thought perhaps by sharing it on my blog I could kill two birds with one stone.
You know how proud I am of you both leading independent lives and being gainfully employed; thank you GOD. I know how difficult it is to make ends meet; particularly living in a major metropolitan city with big city rents, but consider this. According to the National Taxpayers Union, together you pay more in annual rent than the top 25% of Americans earned in 2006 on an adjusted gross income basis. According to the Internal Revenue Service, this top 25% had an adjusted gross income $64,702 and paid 86.27% of all federal taxes.
Who pays taxes in the U.S. is an interesting subject. The IRS reports that the top 1% of Americans who have an adjusted gross income of $388,806 paid just shy of 40% of all taxes collected by the government. The bottom 50% of all Americans pay less than 3% of all taxes collected based on an adjusted gross income of less than $31,987.
If you want to see the National Taxpayers Union data, go to: http://www.ntu.org/main/page.php?PageID=6.
Obviously, within the top 1% tier there are many millionaires, plus a handful of billionaires who pay a lot in taxes. Based upon net worth, not income, the estimates for the number of millionaires in the U.S. varies widely. A quarterly report prepared by the Economist Intelligence Unit on behalf of Barclays Wealth estimated that in 2007 there were 16.6 million millionaires in America But according to the Spectrem Group analysis as reported in Thomson Financial News, in 2008 the number of U.S. millionaires fell by 2.5 million to 6.7 million; a 27% decline.
As for billionaires in the U.S., according to the 2009 Forbes World's Billionaires list, throughout the world the list dropped from 1,125 billionaires to just 793, a 30% decline from a year ago. 357 of those billionaires live in the U.S., which is good for tax revenues. Between all these millionaires and billionaires they are probably paying a significant share of the 40% of all taxes paid by the top 1%.
James, now that you are married and filing jointly, you are in the top 5% of income earning Americans who pay 60.14% of all federal taxes, and that doesn’t include your state and city taxes. However, the bright side for you is New York has a lot of millionaires and about 15% of the billionaires in the U.S. The dark side is the number of billionaires in New York dropped from 71 to 55 in 2008, so I guess the city and state are going to be looking for those lost tax revenues from .... guess who?
I wanted to point this out because Change You Can Believe In is now the reality for YOU, the taxpayer. Americans elected this change and the increasing indebtedness of America is something you will probably feel for the rest of your adult “income earning” life. Yeh, bring it on and keep the treasury printing presses running because there’s a lot more debt to come. Here’s why, but first let’s make sure you understand the difference between the Federal Budget Deficit and the National Debt.
Unlike your employer who actually produces a product to generate revenue, the Federal Government’s only source of revenue is YOUR money in the form of taxes. But unlike you, they don’t do very well living within their means; in fact they are fabulous at spending YOUR money plus a lot more, which they borrow from America’s good friends around the world like China and Saudi Arabia to name two. According to the U.S. Treasury’s Bureau of the Public Debt, as of May 7, 2009, the public debt was $11,200,000,000,000 and growing; I left on all the zeros so you can clearly see what a trillion looks like. The annual interest alone on the government debt is well over $400,000,000,000, and growing. But not to worry about the debt, the government will just borrow more by printing more T-bills and selling them to our friends. This might smell a little bit like Bernie Madoff’s Ponzi scheme, but he’s small potatoes at a mere $50 billion. To put the Federal Government’s $400 + billion interest cost in perspective, your government spends approximately $61 billion on indoctrination, I mean education.
Since 1969, Congress has consistently spent more money than it takes in, even in the years when they claimed there was a surplus! This creates a what? Yes! A budget deficit, which is the difference between what the Federal Government takes in – YOUR taxes – and what they spend – YOUR money, which is now their money to throw around like drunken sailors. Ooooops, I didn’t mean to insult our naval servicemen; which they throw around like drunken Congressman. This deficit gets covered by what? That’s right, more borrowing by selling more treasury bills to our good friends around the world. Except a crack may be forming in the Obamaa debt dam. In the words of one Wall Street economist commenting on last week’s U.S. Treasury auction of long-term bonds, the auction was described as “terrible.” Plus the interest rate increased from 4.1% to 4.3%, which means more interest to be paid. It was further reported that, “This is one of the first signs that Obama’s debt-based economic stimulus plan is about to become a major drag on the recovery.”
Worse to come as a result of continued deficit spending and the printing of money will be inflation or worse, hyper-inflation, which is the cruelest form of taxation. It will hit hardest even the people that pay no taxes.
The bailouts of 2008 and 2009 are out and out deficit spending and there’s a lot more to come with the free spending, and practically unfettered, liberal hands in the U.S. Treasury cookie jar. But wait, "The One" has suggested everyone should pay a little bit more and there will be tax cuts and refunds to a lot of Americans. In fact, as reported in the media, such as CNN and The Washington Post, “Obama called his tax cut the most progressive (that means liberal) in modern history.” He further stated, “It will affect some 120 million families and put $120 billion directly into their pockets.” Remember whilst on the campaign trail, The One went so far as to say, “95% of Americans will get a tax cut.”
According to CNSNews.com, in real numbers 60.7 million people who have no tax burden at all will receive refunds from Obama, while only 33.8 million people, who pay approximately 40 percent of income taxes, will get any kind of refund. Twenty percent of taxpayers, who pay 87.5 percent of total income taxes, will actually see after-tax income decline under Obama by nearly two percent.
Under any stretch of the imagination, when the government takes the money you earned and gives it to someone else that’s government controlled redistribution of income and wealth; socialism by any other name never smelled so sweet to the tax and spend liberals. It's all about government control; and the professional politicians – on both sides of the aisle – want the power to control YOU. So remember that each time you hear that the government has passed another Appropriations Bills, created another social program, is handing out tax credits and refunds, or is funding yet another bailout. Every time you hear that understand they are spending not only your money but increasing the national debt, which YOU will eventually have to repay with what? Yes, higher taxes.
Of course, given the tax burden is already shouldered by a small minority of Americans, and the politicians have to keep drawing water from that well, they demonize “the rich” to the majority of little to no tax paying, but voting Americans. This is socialistic Kool-Aid. It should be no surprise that the current Democratic administration wants an amnesty program for 12 million illegal aliens who if given citizenship, and the right to vote, will vote for the hand that feeds them. And will feed them with what? That’s right, YOUR money. Frankly, in my opinion this is nothing less than a shameless liberal Congress using YOUR money to buy votes.
I close this letter with words of caution. America is rapidly moving down a treacherous road to becoming a socialist state. Many countries in the world have already been there, done that and abandoned it to the trash heap of socialist history. In January 2009, at the opening ceremony of the World Economic Forum in Davos, Switzerland, Vladimir Putin, Former Head of the Soviet Union and its KGB issued this warning. "In the 20th century, the Soviet Union made the state’s role absolute. In the long run, this made the Soviet economy totally uncompetitive. This lesson cost us dearly. I am sure nobody wants to see it repeated. Nor should we turn a blind eye to the fact that the spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors, and shareholders for their decisions, is being eroded in the last few months. There is no reason to believe that we can achieve better results by shifting responsibility onto the state."
Keep in mind this well known quote by Jorge Agustín Nicolás Ruíz de Santayana y Borrás (1863 -1952), "Those who cannot remember the past are condemned to repeat it."
As you get older, you will come to appreciate that the Federal Government rarely does anything well; an exception sometimes being the US military, which this administration will probably gut. Government will never provide a service cheaper than private enterprise or you doing it yourself. Look at how they waste taxpayer money; how the Securities and Exchange Commission, despite being warned, failed to respond to the Madoff fraud; how Congressman and Senators forced banks to make ever more risky mortgage loans.
If you think government control is the answer, look at the facts of the Social Security program. Social Security is currently the largest social insurance program in the U.S., constituting 37% of government expenditure and 7% of the gross domestic product. It is currently estimated to keep about 40% of all Americans age 65 or older out of poverty. To say this is an important social program is an understatement. Yet, here’s how your out-of-control tax and spend Congress treats this program.
There is no money in the Social Security Trust Fund. It has all been borrowed and spent by Congress. However, a record of that borrowing has been maintained and the funds that should be in Social Security are now part of the National Debt. Ah, the National Debt, which YOU will eventually repay with more taxes. Currently, what is being paid into Social Security is more than what is being paid out to beneficiaries, but the surplus continues to be borrowed by government for general budget spending. The bad news is, by 2018 it is projected that there will less going into Social Security than what is needed to be paid out to beneficiaries. At that point the Social Security Administration will have to call in the debts.
Like I said guys, I’m real proud of your independence and professional achievements and knowing that you are part of the America that funds our government. The financial burden being placed on you and your future children is frightful. But, this is the Change You Can Believe In that America elected.
As this administration runs its course, I hope some of what I have written will help you see a little more clearly what your government has planned for your future, and that you will use your vote for more than just promises.
I love you, Dad
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5/13/2009
I cannot agree with you more!
Another frustrated Patriot
68.229.95.57
5/13/2009
So? What's your point?
69.118.160.8
5/16/2009
The point is, socialism doesn't work stupid! The government will never be happy with less money, will always find ways to waste it, the professional politicians will always take care of themselves, and in a socialist state nobody wants to work. Those who don;'t work know they'll be taken care of and those who do work know their productivity will be taken from them. Only the "ruling class" enjoys the fruits of the working class.
75.105.4.168
5/16/2009
The point is, socialism doesn't work stupid! The government will never be happy with less money, will always find ways to waste it, the professional politicians will always take care of themselves, and in a socialist state nobody wants to work. Those who don't work know they'll be taken care of and those who do work know their productivity will be taken from them. Only the "ruling class" enjoys the fruits of the working class.
75.105.4.168
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