Tuesday, October 11, 2016

Boiling the Frog

From Laurie
"While I know it is not likely I would love for the Trump / GOP implosion to be large enough to put the dems back in control in Washington. I don't think we would get the socialistic nightmare that John worries about. I would love to see them pass immigration reform and make their other prioritygood jobs in infrastructure and clean energy. I also like them to address college affordability, including assistance in paying down loans which is the help my kids need." Laurie
From G2A Political Self Awareness.  To help explain where we started and how far we have come, I have adjusted the political continuum. Please remember what this means:

  • In 1916 citizens got to keep ~90% of the GDP to do with as they felt was best for their families. The government politicians and bureaucrats were given ~10% of the GDP to keep citizens safe and to run the country.
  • In 1966 citizens got to keep ~75% of the GDP to do with as they felt was best for their families. The government politicians and bureaucrats were given ~25% of the GDP to keep citizens safe, to run the country and to help the truly needy.
  • In 2016 citizens get to keep ~68% of the GDP to do with as they feel is best for their families. The government politicians and bureaucrats are given ~37% of the GDP to keep citizens safe, to run the country, to help the truly needy and to ???

The question is where will we be in 2066?

  • Are we going to keep giving up our personal control?
  • Are we going to keep giving the politicians and bureaucrats more control?
  • Who knows best how to spend our hard earned income?
  • Do the politicians know better than you which charities you want to support?
  • Which charities are effective?
  • Do they know how to save and invest better than you?
  • Do you want to trust them to provide for your children?
  • You in your old age?
  • If we keep taxing the smart hard working successful people at higher rates, and giving ever more to the unsuccessful with few requirements...  What behaviors will it discourage / encourage?
It is an interesting and disturbing trend to watch.



And from US Spending...  Just imagine what the interest cost will do if the rate goes up a few percentage points...




And remember how to boil a frog.  Put them in cool water and slowly turn up the heat until it is too late for them to escape. (Source)


Thoughts?

24 comments:

John said...

Now to reply to Laurie's comment.

Laurie,
Please remember that the government has NO Money unless it takes it out of the Private sector where it is usually working at one thing or another. Some things it is doing:
- paying employees
- buying things / employing people
- funding the stock/housing markets and raising the value of our 401K's, pensions, and other assets
- supporting charities

I do not know one person who takes their wealth and puts it in their mattress or buries it in mason jars. Pretty much everyone invests or spends it.

So the government will need to pull money from where it is working to:
- fully fund social security and medicare
- improve college affordability
- improve infrastructure
- pay down loans for other citizens
- invest in clean energy
- fund single payer
- fund welfare, etc

Now there may be enough benefit in some government programs to justify removing the money from where it is working in the Private Sector, but I am hard pressed to think that politicians / bureaucrats are more capable than yourself in determining where your money is best spent.

Anonymous said...

If we keep taxing the smart hard working successful people at higher rates, and giving ever more to the unsuccessful with few requirements... What behaviors will it discourage / encourage?

I don't know but that doesn't seem to be the reality. We don't tax Donald Trump at all, at least with respect to federal income tax, and the behaviors we have encouraged are truly ugly.

--Hiram

John said...

Now I agree that Donald has his significant flaws, but he does excellent work with the money.

Washington DC Post Office Building

Apparently he used $200 million of it to employee people and buys materials for this job alone.

Anonymous said...

he does excellent work with the money.

Is that what the investors in his casinos think? Donald Trump lost money in a business where the marks literally handed him their cash, a remarkable achievement indeed.

--Hiram

John said...

The only way to never make mistakes is to do nothing... And he certainly does do things... For better or worse...

Maybe you should be happy that he spent ~$1 Billion, paid tons of people, and screwed the Big Banks... Aren't they the usual enemy...

Anonymous said...

And he certainly does do things

It's not all that clear that he does. For a couple of decades now, Donald's business has mostly consisted of the licensing of his name. Given his tax situation, the huge losses he carries forward, that makes sense for him.

Donald defaulted on loans extended to him in good faith. Is that what you mean by screwing big banks? Is that a practice we should encourage?

--Hiram

Sean said...

"Maybe you should be happy that he spent ~$1 Billion, paid tons of people, and screwed the Big Banks... Aren't they the usual enemy..."

You have completely lost the plot.

John said...

Hiram,
You have no problem blaming the banks for all the home mortgage defaults and the great recession. And yet you are concerned that Trump snookered them?

Sean,
No, Hiram is trying to lead me down the Trump rabbit hole. My point remains the same, individual citizens can make better use of their money than the government can after a point. Otherwise Bill Gates, Warren Buffett, George Soros, Laurie, Hiram, Joel and yourself would be writing extra checks to the government to further their brilliant and effective works.

Sean said...

"would be writing extra checks to the government to further their brilliant and effective works"

If I could control what my extra tax dollars went towards perhaps I would be willing to do so.

John said...

My Point Exactly !!!

You know better than the politicians and bureaucrats !!!

And yet you would advocate that the government seize more money from private citizens and spend it as they think best!!!

John said...

We are already giving them $6+ TRILLION per year !!! ~37% of our GDP...

One would think there are a great number of opportunities for them to use the money more effectively... But of course it is easier to just keep demanding more...

John said...

Especially when ~50% of the population has no problem giving them "other people's money"...

All the while forgetting how they are benefitting from that "other person's money" being in the private economy...

Sean said...

"And yet you would advocate that the government seize more money from private citizens and spend it as they think best!!!"

That's not what I advocate at all. I advocate for them to spend it on the priorities I think are important. I don't advocate for purely random spending.

Laurie said...

I gave $ to a group working to elect a democratic legislature and a democratic legislature could end up costing me more $ than a republican legislature with their policies - does that count as giving the govt more $.

I think the govt could spend my $ better if I skipped going to happy hour a few times each year and they put my $100 (along with $ from other citizens) towards funding extended school year for the 30% of kids who need it.

John said...

Sean,
Now if you would just advocate the government spend the money they have been given more effectively on the things you support, we would be in agreement.

Unfortunately you are supporting candidates who support taking more money out of the private economy from private citizens to create even more government control.

Laurie,
Back to what I said to Sean. You are in the best position to decide if spending your hard earned money at happy hour is a better investment than sending it to the Treasury. My guess is that it is.

Laurie said...

I think providing a better education to all students through funding summer school is in most cases a better way to spend this $ than its current use. Who do you think will be providing the $ that fund your SS payments in 10-20 years? We are all counting on today's students.

John said...

Laurie,
Then my advice is to stop going to happy hour and donate more to your State Board of Education... I am sure Ed MN will appreciate your generosity. :-)

Please remember that I saved and invested hard so I will not be reliant on social security or medicare... Of course that is also why I am frustrated with Democrats who want to increase my taxes because I did save, invest and grow my wealth...

Anonymous said...

Please remember that I saved and invested hard so I will not be reliant on social security or medicare

Most people don't. And of course, there is no guarantee at all that your savings will be there when you need them.

--Hiram

John said...

I am concerned that may be the case if the Democratic Socialists gain full control.

USA She Wants to End 401Ks

Nestman Summary

Bloomberg Poland

John said...

This is one of the reasons I am starting to slowly take some money out of my IRA's even though it costs me a 10% penalty for early withdrawal... On the upside I get a company match by contributing to my 401K that more than makes up for the 10% I am losing...

The whole idea of saving via a tax deferred tool is the belief that your taxes will be lower when you retire... Given the trends in the graphs above, I am not sure that will be the case... Especially for those of us who learned, worked, pinched pennies, saved and invested...

I mean that huge pile of untaxed money must look like a huge potential windfall for the wealth transfer supporting Liberals...

Sean said...

Ghilarducci has long been right about the inadequacy of 401(k) plans as retirement savings vehicles. Her plan is a reasoned approach to the problem.

John said...

Okay I printed the plan off and skimmed it... My final rebuttal is going to need to be a new post...

At first blush it looks like an excellent example of government mandated wealth transfer and increased control.

The only benefit I saw was that it looks like the "trust funds" will be invested into diverse portfolios rather than in US bonds.

Otherwise it has tax credits so people can save without really saving. And this will be paid for by extra taxes on people who really did save and invest.

And your account whether big or small will magically be annuitized to last the rest of your life when you choose to retire... The graphics on Page 20 is the most disturbing.

Apparently the GRA is going to help you save far more than the 401K, and it will pay out your ending balance every year for the rest of your life. :-) Whether you live 3 years or 30 years.

I am assuming that if you die 3 months into your retirement... Your children get no inheritance... Even though it was supposedly saved in your personal account.

Sean said...

The graph is misleading -- the plan is not to annualize the final balance, but rather to use that balance to fund a lifetime annuity which would supplement the individual's Social Security payout.

John said...

As I said that monthly stipend will vary greatly dependent on ones balance at the time of conversion. That is unless some more magic occurs.

A timely piece