Hats off to Senator Ron Johnson (R-Wisconson) for pressing HHS Secretary Kathleen Sebelius about the economic and insurance impact of ObamaCare.
Johnson challenged Sebelius over a number of the Obama administration’s claims about the new health care law, namely that it will reduce the deficit and allow individuals to keep their current healthcare plans.
This video clip is worthwhile to watch in its entirety, as Selelius is unable to answer basic facts about the legislation. Thanks to the Washington Free Beacon for providing the information. Let’s just hope Senator Johnson will not be expected to apologize for making her uncomfortable…
As a CPA, it is frustrating to hear Social Security repeatedly being described as a pay-as-you-go (“PAYGO”) system, which gives credence to something that is terribly incorrect. PAYGO is not a system at all; rather it is a method of reporting that hides earned realities, making it totally unacceptable to accounting professions, SEC, and virtually everybody.
The fallacy of calling it PAYGO is that, in reality, the cash includes everything we are getting in, while the cash out doesn’t include the responsibilities due to come. The cash out formula specifically excludes the trillions promised to existing workers in the future, (while their Social Security tax is being collected today). It doesn’t really describe, as part of the expenses being incurred this year, the amount of future retirement benefits being earned and promised.
In contrast, if you give an insurance company today $100,000 to pay you a retirement pension beginning when you retired at the age of 65, the insurance company (logically and legally), the insurance company would report this as an asset offset by a liability to provide $100,000 of payments in the future. The Social Security system, however, reports that as $100,000 of profits in the year received, while the obligation to account for and provide future benefits is incredibly ignored.
When the cash in is received, that money egregiously goes into the government’s general tax revenue account and not in any Social Security Fund (anymore). The Social Security Administration merely collects and records the gross Social Security tax receipts, while the net amount, after deductions, is sent to the IRS. Yet the gross amount recorded is the amount spent by the government, resulting in the staggering deficit we face today. Therefore, it is outrageous for anyone to say that accounting for the system can be done simply by looking at the cash in-cash out.
The biggest problem with this arrangement is that it puts the burden on the wrong people. We have a growing population of retiring taxpayers and the current generation is paying off the obligation the older generation never paid for. It is a Ponzi scheme in which, depending on how you play it, you manipulate who is paying whose obligation. Therefore, the PAYGO method doesn’t work because the government takes 100% of the money they receive and they do not put away; they need it to pay today’s debt to another taxpayer, while today’s payee is stuck holding the bag.
According to the Social Security trustees, in a report released this past fall, unfunded liabilities – those promises made to individuals solely in exchange for amounts they have already paid for – amount to an $18 trillion deficit. Social Security in its present form is unsustainable.
The term PAYGO is used for the lay person; cute semantics – but misleading at best, willfully dishonest at worst. It mischaracterizes the program for the political purpose of allowing politicians to declare that Social Security does not contribute to the deficit, and therefore, should not be overhauled in any major way. But until we agree to start recording Social Security (and Medicare) in budgets in actuarially sound way, we will never be able to honestly and effectively deal with their fiscal crises.
President Obama: Do you think the President of the United States going into re-election wants gas prices to go up higher? Is that — is there anybody here who thinks that makes a lot of sense? Look, here’s the bottom line with respect to gas prices: I want gas prices lower because they hurt families.
President Obama made it a priority of his busy day of not producing a workable budget or cutting the deficit to be supportive of the coed student who complained about the cost of her contraception. He calls and apologizes to her for her interaction with Rush Limbaugh. But our Commander-in-Chief has yet to call the family of slain soldier from Virginia, Army Sargeant Timothy John Conrad, who died February 23, following the Koran-burning incident (which Obama apologized on behalf of America for.)
admitted to a House committee that the administration is not interested in lowering gas prices.
Chu, along with the Obama administration, regards the spike in gas prices as a feature rather than a bug. High gas prices provide an incentive for alternate energy technology, a priority for the White House, and a decrease in reliance on oil for energy.
David Harsayni wrote about this very conundrum five days ago. Now we better understand why Obama nixed the Keystone Pipeline project. As I mentioned earlier, a project of this magnitude moving forward has an immediate effect on the markets by changing the traders’ expectations of future supply. Having more oil available in the marketplace contributes to lower prices for consumers. So when the project was tabled, the markets reacted accordingly.
I guess the White House knows what’s best for us better than we do.
A new poll released from The Hill shows the following —
Three-quarters of likely voters believe the nation’s top earners should pay lower, not higher, tax rates, according to a new poll for The Hill.
The big majority opted for a lower tax bill when asked to choose specific rates; precisely 75 percent said the right level for top earners was 30 percent or below.
This sounds a lot different than the Administration’s continuous assertion that the people want the rich to pay more taxes; ergo, we need to tax them more! It’ll be interesting as we keep an eye on this trend in the coming election months as the anti-rich rhetoric ramps up.
A major theme of Obama’s reelection campaign is centered on taxes. On the one hand, he decries the unfair “Bush tax cuts for the wealthy”, while on the other, he creates new tax credits to purportedly help the recovery. Both are emotional appeals aimed to garner votes. Such policies reveal — once again — how economically ignorant our President is.
The rates currently in effect have been in force for more than 8 years, and what is now being urged by Obama is an increase in the highest marginal rates to what they were before the “Bush tax cuts of 2003”. Obama does not know his economic history. In what way was the 2003 change even a tax cut? It really wasn’t. At most, it was a very slight reversal of the major tax increases that had been put forth in the preceding fifteen years.
To put it into perspective, the last major change to the Internal Revenue Code (IRC) was a revenue neutral change in 1986, whereby the entire Internal Revenue Code was revamped. That brought down the tax rate, eliminated deductions and reduced tax shelter type benefits. This served as a flat tax adjustment which indisputably was responsible for the strong economic growth that followed, because, at that rate, it wasn’t worth the time, energy, and expense to shelter money elsewhere. But after we made this major positive correction, our legislators went right back to business as usual with new tax laws and changes.
The new 1986 IRC set the maximum tax rate at 28%. Through the government’s inability to keep promises (which was to reduce rates in lieu of changes to deductions), both the Democrats and Republicans participated in breaking promises in the ensuing years.
We saw the rate increase from 28% to 31%, as the first President Bush broke his“read my lips” promise. Through the Clinton administration, the maximum rate went from 31% to 35% and then to 39.6%. All in all, the maximum tax rate increased 40%. Bush’s tax cuts then, were not tax cuts at all – they were simply a reduction of the 40% tax hikes, down to a more modest 25% increase in the rates, from the base set made in 1986. The margin cuts of 2003 simply eliminated the last of three successive rate increases, each of which had broken the implicit pledges made in the overhaul.
Now in recent months, there has been a renewed call to clean up the tax code that has gotten out of hand in a mere twenty-five year span. What needs to happen is similar to what happened in 1986 — lower the rates, but get rid of deductions for special interests (such as special allowances for the oil and gas industry, “green” initiatives, and other crony tax benefits). In sum, make the code shorter, simpler, and more beneficial for economic growth.
The reality is that Obama will try to get reelected by saying that the economy is still weak, so he must do something about jobs. He has proposed a plethora of new credits to purportedly help the situation, such as employment credits, business credits, etc, but they’ll only worsen the byzantine code.
Even Obama’s commissions have argued in favor of cleaning up the tax code. Why make it more convoluted with more credits? Quite simply, they sound good to the average taxpayer, who will reward his “sensibilities” with their vote. What he doesn’t tell you is that such tax credits are merely government spending run through the tax code. More spending and deficit is only going to continue to hurt our anemic recovery. Unfortunately, such a fraudulent plan only puts his own ambitions ahead of the best interests of his country.
{I}f you don’t ask, you know, the most fortunate Americans to bear a slightly larger burden of the privilege of being an American…
This folks, is our Treasury Secretary. Of course, it’s not like Geithner is serious about reform. Remember his argument that the debt ceiling just needs to be extended? I took him to task for that. We still have no real desire to make the spending cuts that are so desperately needed, especially since the current plan is clearly to find more ways tax the rich.
When the Budget Control Act of 2011 increased the debt ceiling last August, Congress, the administration, and outside analysts believed that this increase would allow federal borrowing under the limit well into 2013,” the center’s analysts wrote. “Due to unexpected circumstances … that belief appears increasingly likely to have been misguided.”
I’m sure Timmy will be a good American and do everything in his power to make sure that doesn’t happen until after the elections.
