Discussion:Now this is scary

(I'll move this to chat in a few days.)

BUT, I'll say this. We seem to have no problem with millions and millions of Americans who accumlate no wealth at all.

Your house is not wealth, in my book. It's a place to live. You should not spend your house unless you have a better use of those funds (higher ROI). Unfortunately, to Joe Six-pack, a bass boat represents a higher ROI. lol.

What's left then? 401(k)? Never has a more perfect machine to destroy wealth ever been invented (I'm talking real world here).

You know your country is in trouble when people care more about their credit report (how can I go further in debt?), than their savings account.

Lately, I'm hearing again: Where is the consumer? The consumer can bring our economy back....

Hopefully, the consumer has gotten a little smarter after this latest SNAFU.

What happens to the American economy if we can't sell to (read: rip off) Joe Six Pack anymore? Wow, we might actually have to make products that the rest of the world wants, and sell them overseas like all strong economies do.

In other words, when our side does it, that's okay. When the other guys do it, fie on them.

Good point about SS Illini.

Discussion: Calvert altern fuels credit tax scam

Our free market regulating itself.

Back to the savings idea, if the federal government wants individuals to save, why doesn't it promote the idea by example. Our current debt is almost $38,000 for each and every one of us. That's more than many people make in a year.

How many times have I heard: The consumer is 70% of the economy. Get out there and spend. Go into debt to help the economy, and die poor.

The truth is, not one of those politicans care about the little guy other than to bleed him dry.

Same goes for most large corporations. How can I rip-off the little people? They actually have contempt for their customers these days. Too much flying around in private jets will do that to you.

We will only have a good economy when we become net exporters again, and have the imagination to make products that the world wants. I don't know if they teach Harvard MBA's how to do this, however.

Give 'em an inch, they think they're a ruler.

I'm thinking that it's very likely that the social security system won't be able to pay out what's been promised - probably shouldn't have watched the movie "IOUSA" recently!

I'll stick with my beloved John Wayne, Jimmy Stewart and Humphrey Bogart classics from now on.

Discussion:A Preview of Upcoming Tax Law Changes?

All the links still work.

While the plan appears to have changed, it is still the same concept. Forced retirement savings. This story received no coverage before the election and had it, the Democrats would probably not have gained much of the traction they did in the 2008 election.

If you look at Bonnie Erbe's column, her analysis is most likely correct: this administration is guaranteeing a return of the GOP in 2010.

Tom

I give Obama credit for facing the issues that the country must face. We can run, but we can't hide regarding healthcare and energy.

However, the timing and the execution of his goals really needs improvement. For instance, this healthcare bill is shaping up to be a disaster (tries to please everyone: impossible).

Cap & Trade: you don't do this in the middle of a recession. Bad timing.

Since the wealthiest 1 percent of American families owns roughly 34.3% of the nation's net worth, and the top 10% of families owns over 71%, but the bottom 40% of the population owns way less than 1%, I AM NOT worried about taxing the rich! I think they have some change to spare for all that they have squeezed out of our country.

The 5,000 LB gorilla in the room are doctors and hospitals. NO ONE ever complains about THEIR exorbitant fees -- it seems only the insurance companies and the pharmaceutical companies catch all the blame for our broken health care system.

We had a local carpenter involved in a car accident and broke his leg -- one month later and $160,000 in bills and he is now bankrupt. (I don't know why the auto insurance did not cover this.) The carpenter, of course, did not have any medical insurance (maybe he was an uninsured motorist too???). Rather than wag our fingers at not having proper insurance, WHY does it cost $160,000 to mend a broken leg???? That's probably 4 years worth of wages for the carpenter. When was the last time you charged anyone 4 years worth of wages for one month of services?

The ratios of medical bills to the mean annual income is obscenely out of whack. Insurance may be the big bad wolf, but they are paying the majority of doctor and hospital fees. Of course our insurance is unaffordable when it is being used to pay out these exhorbitant fees to the medical profession.

I have never been for governmental intervention -- I have always preferred the often imperfect world of a free market. However, if doctors, pharmacies, and hospitals are not willing to lower their standard of living by about 30%, then I feel like the government should lower the boom and start controlling prices with a single payer system.

I cannot afford any more for health care - it's breaking our own family's budget. I do fear, however, that the government is not going to offer governmental insurance to everyone across the board. They will still expect my family to pay the same exhorbitant rates for the same mediocre care via either tax or a sliding scale. The problem is the medical community, NOT the insurance companies.

"But, it strikes me as strange that people would be aghast at this plan, while sleeping well over the fact that millions of Americans do the exact wrong thing with their money."

When Congress does "the exact wrong thing with their(?) money" I believe more people are hurt than when millions of Americans do the same.

Congress is made up of people, who compromise to try and satisfy millions of (voting) Americans; and they can do no better than the Americans who are the deepest in trouble and yelling the loudest for relief.

Also, The health care system can perform almost miraculous feats. But the research, training, etc. to perform these feats cost incredible amounts of money. A knee that is badly mangled can now, after operations and new parts, be repaired. No matter what the government does, or does not do, paying for all that medicine can do will become impossible.

Everything that is done to make this world a Garden of Eden from the "top" down will create more problems through unintended consequences. And if each of our efforts is centered on great health and financial security, we will inevitably find those efforts wasted.

Unintended consequences: I'm sure the politicians of the late 90s did not envision how the market would correct itself when they opened the barn door and let the Wall Street boys play their games, just as those in 1980 never intended that their reform, boosting FDIC insurance, would bring about the Savings & Loan disaster. It can be rather amazing when you leave money with either the private sector or government....the only difference being that you can vote government out of office.

I also find it odd that our health care cost per capita is almost twice that of other countries.

JR...when the "Great Communicator" Reagan come along in 1980 with his ideas of Supply Side Economics (Trickle Down), the idea was to reduce marginal taxes on the wealthy, make the rich richer, and the rich would pull the rest of the country up. During the last administration, a younger version of these same lunatics tried to get rid of the estate tax.

Lets see how this has worked: 10% of American families control over 71% of the nation's wealth, a stunning 1% of families control 34% of the wealth. Hmmmm. NASA, we have a problem. Can you say Banana Republic?

So, it didn't work. On the other hand, the rich have been richly blessed by these policies (to put it mildly). It's high time they gave something back.

If the rich have the right, as you put it, to jigger the deck in their favor, then surely the poor and middle class have the same rights to develop a more sane policy for the country.

For example, we've decided, via Social Security, that we want the government to take care of us in retirement. The other side of the coin is that we agree that we can be put in jail for not paying Social Security taxes.

Every word of the Declaration of Independence was so carefully crafted and debated. The phrase those bad boys came up with was that we have rights to "Life, liberty and the PURSUIT of happiness", i.e. we have a right to pursue happiness, not to be given it by the government.

What a great discussion we have going, as usual. I think we should all be delegates to the next Constitutional Convention. We sure run the gamut of points of view, but seem to be able to air them respectfully. Lord knows we don't want to alienate anyone who might come up with the solution to our next tax problem.

Now, we have the "good war", universal health care, tax business more, Cap and Trade, etc. All things to be managed by the Best and the Brightest. As Sam Rayburn said about the group in the 60's .." I would feel a whole lot better about them if just one of them had run for sheriff once." I would feel a "whole lot better" if one of them had started or ran business. They have all been employees and approach tax situations from an employee view point ... all income is disposable income. I wonder what the unintended consequences of these Best and Brightest. The criticism of Bush in Iraq was no exit strategy, I see the same thing happening with Obama ... whether it is Afghanistan, universal health care, etc ... no exit strategy if the unintended consequences begin to destroy the economy, health care or whatever.

Along the way, they vitiated the decent reforms accomplished, like TRA 86. That piece of legislation is unrecognizable now. Moynihan noted that when GHW Bush asked for preference for capital gains, he was putting the laws of hydraulics back in the system.

Kennedy, Johnson, the Supply Side crowd of the 80s and the Cakewalk boys of Iraq all possessed the fatal flaw of hubris.

Oh well, if it was that important, I would know it already.

http://wiki.answers.com/Q/What_does_%27hubris%27_mean

I'm scheduled for a physical with a new group and guess who is doing the physical? A PA!

-)

A very sobering opening chapter about the guaranteed demise of Social Security and Medicare due to demographic changes -- shrinking work force to support pay-for-current-users system we have. The amount of capital required to meet the soc sec and medicare future obligations was $72.4 Trillion. In 2004, when this was calculated, the total equity value of ALL the publicly traded companies in the WORLD was "only" $36.1 Trillion -- all the BONDS in the WORLD was $31 Trillion.

With our world equity shrinking by this last financial melt down, the "Rich" aren't looking so rich any longer. Even if we confiscated 100% of this GLOBAL wealth, it won't pay for the UNITED STATES future SS and Medicare obligations.

Ben, in 2005 was not painting a very rosey retirement scenario for the late boomers and generation Xers at all. Imagine what his prognosis must be now?!

The point of his book is that, yes you can retire comfortably, but you better save a whole lot more than you ever thought you needed and you better not depend on SS to pay for it.

The bottom rungs of society will enjoy a subsistence life style guaranteed by the government. The ultra wealthy will enjoy a great retirement, but not as great as it could be due to very high taxes and zero social security and medicare benefits. The people in the middle will not qualify for or will enjoy only 30% to 50% of what their "future SS benefit statements" are telling them to expect. The people in the midddle will be in dire straits. The minimum age to even "think" about retirement will be closer to age 70 for those of us in the middle. BTW -- people with government jobs and benefits stand to do a whole lot better than those of us in the private sector.

Good health and great employment skills will be exceedingly important to "survival" of what promises to be some really "not so good" times to come.

Plus, it's becoming clearer and clearer, that the very best investment you can make is to do all you can to control your health via lifestyle choices. (Although I do think our ability in that area may be a bit overestimated.)

One really interesting issue is when to start collecting social security. Some very smart people I know are starting to collect as early as possible, notwithstanding the substantial increase in benefits each year you put it off.

Their thinking is that when the &&%% hits the fan, they will at least have gotten something!

(Thanks for the definition of hubris.)

 http://www.agingsociety.org/agingsociety/publications/public_policy/CBPPhealth.pdf

Stein and DeMuth also told us that we could time the market. And then they told us in 2008 that we could supercharge our portfolio.

Information on the Social Security website pegs it at 76% starting in 2037 for someone who is now age 39:

http://www.socialsecurity.gov/qa.htm

If that's the case, common sense points toward it being extremely likely that the remaining 76% would be expected to be handed out first to those with no other resources, and then less and less to those with more resources, including those in the middle.

Does that make sense?

Do any of you realize that it was only in the late 90s that the age of being able to collect full benefits without earnings limits was lowered from 70 to 65 [now 66]? Of course, times were different then and the rules makers were undoubtedly influenced by the market bubble at that time, and the fact we had actually balanced the Federal budget. Personally I am tickled pink as I now collect a full check yet continue to earn my salary, but for me, that will be almost $90,000 for these four years, $90,000 out of the fund.

"In 2017 we will begin paying more in benefits than we collect in taxes. Without changes, by 2041 the Social Security Trust Fund will be exhausted and there will be enough money to pay only 78 cents for each dollar of scheduled benefits. We need to resolve these issues soon to make sure Social Security continues to provide a foundation of protection for future generations."

As Death&Taxes says, the fix shouldn't be that hard, but I'm wondering if the way our political system has evolved into working will allow for easy fixes based on common sense.

But, this is all hypothesizing - I'm sure whatever happens that we'll deal with it somehow.

In 1983 or so, a journalist sat in my office and noted the rosy projections given by banks and investment houses about the effect of putting away $2,000 a year in IRAs. My friend asked what did I think would happen to those who could not afford to put $2,000 a year away for that glorious future. To him, the world would be divided into millionaires and others.

My mind wandered to the image of Paul Muni at the conclusion of "I Am A Fugitive From A Chain Gang." He is on the run, hiding in bushes outside a diner talking to his girlfriend. She asks, 'What will you do, Jimmy? How will you live?" I hissed Muni's answer back to my friend, "I'll steal."

Some smart economists are saying that the problem won't be 2037, it will be more like 2017, when the U.S. government starts to have to borrow on the open market to finance the social security shortfall of benefits vs. taxes.

Those same smart economists also refer to the coming "demographic tsunami" after which the structure of things will be much different than now, with way fewer younger folks producing goods and services for way more older folks.

I don't know whether I agree with all this or not, but notwithstanding my being far from a smart economist, I'm pretty sure that unexpected things will occur in the future with regard to national economics.

For those of us who have done a good job of saving for our future retirement years, SS will be a pipe dream -- so yeah, if you can get it NOW, you better TAKE it before it evaporates. That of course will leave little or nothing for the rest of the population.

Natalie -- perhaps more babies being born NOW will help resolve the worker to retiree SS ratios twenty years from now. As a personal note, I feel that abortions have contributed to the smaller future work force. It really does take children and grandchildren to take care of grandparents. Not ALL babies who are aborted would be welfare babies - many of them would have been great contributors to our society. It's too bad.

That being said -- good luck on having TWINS!  ;-) You get a savings account AND you help solve the SS/Medicare problems. As a retiree in 18 more years (assuming Age 70), I and others my age thank you for your efforts!  ;-)

I don't see too many people returning their S.S. check to the Treasury when they get it, so I presume that they have some need for it (besides the fact that it does keep a lot of people fed and in clothes who might not have either without S.S.).

If the American people decide that they want Social Security, they will have it. Period. I am just happy that we did not fall for the policy of greed advocated by the Elephant Party (i.e. make Wall Street rich) and decide to invest S.S. funds in the stock market. Had we done so, we would have really been in the hole.

I think the medical business is about to take it in the shorts -- when government finally gets control they will dollar cap every medical procedure known to mankind (cost controls) -- this will deflate costs. There will be rationing, deflated/capped care, medicine will no longer be the very high elite income occupation that it has been.

I think we are about to go through a generation of deflation as the aging boomers retire. There will be too little money chasing after too many goods as the boomers sell off their accumulated assets (homes, stocks, businesses, etc).

I'm not convinced the government has enough cash or printing power to stimulate this dead horse economy. If they do resuscitate it, then the inflation will be hyper.

Remember, our Depression was a deflationary period.

http://inflationdata.com/Inflation/Inflation_Rate/CurrentInflation.asp

Actually, Illini, I agree more babies would help the SS situation. And just think, in about 40 years or so they will probably be able to cut back on the tax rates because people won't be living as long anymore -- too many obese people who have diabetes and other diseases.

Cheap labor puts the break on inflation but still allows the middleman to make a huge profit. Does this sound good to you? If it does, then explain it to the millions of families here that have lost good jobs to underpaid foreigners since 1980.

That's all our large retailers are today: they don't create a better mousetrap, why should they? Same for our manufacturers. Why should they innovate when they can make the same profit by exploiting labor overseas or south of the border?

So its not a question in the USA of deflation or inflation. The truth is that we are in for the worst of both worlds. We will continue to have deflation of manufacturing wages here (and some services that can be done over the net), but at the same time all goods and services that depend on location and proximity (e.g. plumbing, doctoring, some kinds of farming, your local utility, a rock pile, a hotel) will be marked by runaway inflation.

Bring in that worldwide minimum wage (let the economists do the math as to how to equalize it), and we can make progress worldwide on an equal basis!

"It is estimated that offshoring accounts for only 10 percent of the jobs lost ... Clearly, offshoring is not the real culprit in the lack of new employment. Companies have learned how to do more--produce more goods, service, and profits--with fewer workers by using technology more effectively." The strategic implications of technology on job loss Places such as China and India are also experiencing job losses due to automation.

An interesting example, I was in an Amish area of Indiana noted for its Amish furniture. I was up early going for my morning run and there was a company that did custom routing ... being a woodworker, I was interested. I expected to see a work force of Amish using belt powered routers. The young Amish guy who owned the facility invited me in ... he had four CNC routers producing chair legs in a matter of seconds that would required hours for a craftsman to do.

You like to pick on the "Elephant Party", but I don't think the Donkeys including Obama have a clue that well paying jobs require technology and technology requires capital ... and that capital goes where it gets the best return. As I have said before, I am not again taxes, taxes are the price of civilization, just again dumb taxes that penalize investment in factories, etc. As I have said before, they think like employees ... all income is disposable.

So Crow, are you against outsourcing labor for services, too?

It's not really the fact that we manufacture things that I was pointing out. It's being able to exploit the great disparity in labor costs by moving jobs overseas. This is what has destroyed the American middle class.

And Natalie, you don't even have to outsource labor for services these days by networking with India, for example. All you have to do is bring the labor in from overseas like we do with the H1-B Visa (a scandle), or look the other way when the illegals cross our border. A lot of these people who seem to be outraged over illegal immigration are crying crocodile tears, because they will hire these people in a NY minute.

Finally, Snowbird points out the best and the worst of aspect capitalism as the game has been played for some time: capital goes where it gets the best return.... I would respond that it can do this two ways: a good way: by innovation i.e. inventing a better mousetrap (manufacuring technology), OR in a bad way, by exploiting cheap labor which requires zero brains or innovation and disrupts the lives of millions (as it's done with our middle class). I would propose taking the latter incentive away with a worldwide minimum wage.

P.S. And if you want your kids to do well in this free-trader world, get them in a job that has to be done "on-site", for example: licensed plumber, licensed electrician, any kind of skilled, hands-on service where physical location counts. I would say surgeon too, however, they are moving so fast with this robotic surgery that a surgeon will soon be able to sit in his living room in Oregon (or India), and operate on someone in Georgia. Examples of other goods businesses would be the local rock quary, a concrete plant etc.. etc.: those type businesses will do well because their products can't be "imported" economically. Use your imagination.

Rebates are a perfect example of attempts to move goods, but also check out Hyundai's program of 'we will make your payments if you lose your job.' While there may be a 'catch or two,' this is not snake oil but a try to move cars off the lot, and a way to try to reassure the nervous public. But if I have a 2003 Elantra with 130,000 miles on it [which my wife does], but am concerned about my job [just yesterday her employer announced buyouts for those who are over 55 and whose terms of service plus age exceed 60], such offers will not get me in the showroom. Those who are secure, like tax professionals, would probably never consider the offer or drive an Elantra.

Several home manufacturers are making similar offers....an even worse bet but you get the idea that there is an excess of inventory in so many areas.

Congress contributes to the fight without saying the 'D' word: the First Time Homebuyer program tries to move real estate, but when you think about it, so does the 1,500 energy credits offered for home components, and in a perverse way, the 'cash for clunkers' is a bald face attempt to move inventory off the lots.

This deterministic thought neatly obscures the tech revolution that took place in the late 90's and much of it in a state with god-awful taxes. I could say that perhaps the fact that those in power actually balanced our budget had something to do with it, but I don't think that the case at all. I think it is all chance and happenstance.

Rubin's idea at the time was to lessen the footprint of government on credit markets, and it seemed to work only to be done in by the idea that we could fight wars while cutting taxes, and then try verious stimuli....ideas that continue to this day, so that we are like the young man in Casablanca, throwing our money on the table in hopes that something will work.

Yet the 'markets' also helped take it away....giving loans and packaging them into tranches and deriatives that have ruined our finances.

I would add another caveat ... make them get a solid foundation in the sciences, math and languages and never stop learning. My kids, we turned off the TV and allowed them to read (they had nothing else to do). Grandkids, they have TV, WII, internet, etc. However, we pay them for books they read.

We still have a tax system based on the old paradigm. I give you one example, Nonresidentila real estate had a MARCRS recovery of 39 years. Does anyone really think that a purpose built factory building has a useful life of 39 years today! It has been some of the loop holes than Obama now wants to close such as no tax on overses profits until returned to the US that permitted companies to still be competitive.

So, assuming that we agree that the current national course is unsustainable, what sort of time frame are you all guessing, in terms of a disruptive situation that affects each and every one of us (assuming we get through the current one!)?

But some of the employees and founders who made those booms were blindsided with the same thinking that pervaded Wall Street post 9/11.....get it now, everything for the shortterm, and this after capital gains rates had been lowered. For about ten years, the cashless stock option was king. There are very few better examples of 'get it now, don't lease anything on the table.' I contributed to this when I used that last phrase if clients asked whether to exercise and sell.

Replaced by the mark.

As far as what we teach our kids goes, I would like to see my boys doing something more than working with concrete. One thing that would help in that arena, in my opinion, is reducing the amount of "screen time" that kids have . . . well, adults, too. My boys and I were at a shopping center the other day. Two clerks in a store mentioned how nice it was to see the boys carrying books rather than video games. This is really a whole 'nother topic, however.

http://www.abc15.com/content/news/investigators/story/Social-Security-spends-700-000-on-Phoenix/RrHYWi4IRka1mC7wJTm4uQ.cspx

Now, I realize my wife works for the federal government, I did at one point, I have a sister who works there, my dad worked there for 40 years, and so on, so I really am not against them. What I am against is intrusive government and wasteful spending. While AIG was raked over the coals for their retreat, this is a bit silly.

My wife goes to many conference and so does my sister and I know for a fact they never have these type of events at their conferences. They do this type of thing when they are off-the-clock.

Tom