Who will Pay for the Tax Cut?

I am sure hoping some miracle occurs because of these proposed tax cuts, because if they don't it looks like paying for them may hurt some people who really can not afford the loss of money / services. Please remember that though the changes will help me and mine, I would have preferred to not change the tax code and to start cutting the spending. Actually running surpluses and starting to pay down the national debt before the next recession comes would be much wiser and truly Conservative.

VOX Who will Pay for the Tax Cut
The Hill Restructure SS and Medicare
Forbes How Long until Cuts Pay Off
WAPO Prelude to Attacking Entitlements
WAPO Ryan Admits GOP to Target SS, Medicare, Medicaid, Welfare, etc
The Hill Past History
CNN Tax Cut Make it Harder to Fight Next Recession

"Officially, the tax bill passed by the US Senate in the early morning hours of December 2 costs $1.45 trillion over 10 years, or $1 trillion after taking into account its effect on economic growth.

Those are the numbers of the Joint Committee on Taxation, Congress’s official arbiter of tax figures, but skeptics like the Committee for a Responsible Federal Budget have argued that the true cost is substantially higher. If the many temporary provisions of the bill are made permanent (and Republican senators have insisted they will make them permanent), the true cost is more like $1.6 trillion to $2 trillion, and it continues to mount after 10 years are up.

That bill has to be paid for, somehow. Congress could keep rolling over the debt, yes, but historical experience suggests that tax cuts are typically paid for by tax hikes in the future. Republicans have suggested they want to finance the cuts by slashing entitlement programs like Social Security, Medicare, and food stamps. “We're going to have to get back next year at entitlement reform, which is how you tackle the debt and the deficit,” House Speaker Paul Ryan said in a radio interview on Wednesday.

Whether you pay for the $1.5 trillion through tax hikes or spending cuts, that financing changes who ultimately wins and loses under the bill. And a new study by the Tax Policy Center suggests that when you take financing into account, the vast majority of Americans lose out."

Religious Disputes / Flexibility

This is interesting piece discusses in part why normally religious people seem so blind to the sins of Trump, Moore, etc.  A question that I have asked myself often...

CNN Why is Religion so Devisive?

"What we think are bedrock principles are not really bedrocks," said Robert Kurzban, a professor of psychology at the University of Pennsylvania and one of the researchers behind the equality-equity game. "As situations change, people have different perceptions, and they measure the costs and benefits of holding moral commitments." 

Consider white evangelicals' willingness to support politicians who act immorally in their personal lives, Kurzban said. In 2011, just 30% said they would do so, but in 2016, when Donald Trump became the GOP presidential nominee, that number leapt to 72%. 

"You have to ask, were their answers in 2011 suspect, or did their interests change because they wanted this guy who would give them goodies and power?" said Kurzban"

Financial Literacy 101

So on my way back from Chennai, I had an opportunity to listen to Freakonomics Financial Literacy 2017 and it was so depressing to learn that "roughly 70 percent of Americans are financially illiterate."  To be deemed financially literate one only had to answer 3 questions.

Question 1: Suppose you have $100 in a savings account and the interest rate was 2 percent per year. After 5 years, how much do you think you would have in the account if you left the money to grow?” The answers were multiple choice. A) More than $102. B) Exactly $102. C) Less than $102. D) I don’t know. 

Question 2 is about inflation: “Imagine that the interest rate on your savings account was 1 percent per year and inflation was 2 percent per year. After one year, how much would you be able to buy with the money in this account?” The answers: A) More than today. B) Exactly the same as today. C) Less than today. D) I don’t know. 

Question 3 has to do about risk diversification: “Do you think the following statement is true or false: buying a single company stock usually provides a safer return than a stock mutual fund.” “True,” “false,” and of course you can say, “Do not know.”

Answers posted below.

Then I read this piece and was even more depressed... CNN Who is Benefiting from Stock Market Rise?

"On average across the United States, only 18.7% of taxpayers directly own stocks. Now, these numbers only include stock portfolios, not the roughly half of Americans who participate in the market through an employer-sponsored retirement plan, according to a Pew analysis of Census Bureau data. Access to those plans also skews towards higher income people, Pew found. In addition, more white people invested this way than black or Latino people, as did more older people than younger people."

The idea that people do not understand the simple concepts and value of wealth management truly has me stunned.  NO WONDER POOR PEOPLE ARE POOR !!!  If they can not understand simple rate compounding and the impact of inflation, we have a big problem.

In the Freakonomics link they also talk to Harold Pollack who was not too informed regarding finance initially. However after doing some research he wrote the most important principles down on an index card. He did note that some people can not set aside 20%, however even 10% will compound over time.

With this in mind, how can we get citizens to understand these simple and critical concepts?

And it certainly confirms my belief that our forced savings / insurance programs (SS, SS D & Medicare) are absolutely necessary.  I mean if 70% of individuals can not answer those simple questions, there is no way they are capable to be prepared for retirement when that time comes.


From Forbes Money Rules

Answers to the above questions

Answer to Q1: The correct answer is: A), more than $102. Because 2 percent interest on $100 in a year is $2, so after year 1 you have $102 — and then over the remaining four years, the interest grows on that $102, and so on. And that’s why compound interest has been called “the eighth wonder of the world.” 

Answer to Q2: The answer is C) “less than today” because if inflation is 2 percent, prices go up 2 percent. But if you only earned 1 percent in your saving account, you basically can buy less. 

Answer to Q3: And the correct answer is … true! Buying a single stock is safer than buying a mutual fund. Just kidding! That’s false.