October 1, 2009

POR Economy/Obamanomics Graph of the Day

Filed under: Economy,Soc. Sec. & Retirement,Taxes & Government — Tom @ 11:52 am

Since the POR (Pelosi-Obama-Reid) Economy began, federal receipts from economic activity (i.e., excluding 2008′s stimulus payments, which the government treated as negative receipts) have plummeted dangerously:

US12monthRollingReceipts0909

The chart assumes that September 2009 receipts will come in at $210 billion. That’s probably optimistic.

As noted earlier this morning (Pajamas Media; BizzyBlog tease), one cash casualty has been the short-term viability of the Social Security system, which is running monthly cash deficits right now, and which the Congressional Budget Office has said will start running cash deficits on an annual basis starting next year (actually now this year, since it’s October 1). If unemployment, which is currently at 9.7% and still due to climb more, stays above even 8% for an extended time period, which Obama administration economist Larry Summers has said is a virtual certainty, CBO’s numbers will have been proven to be very optimistic.

So …. rolling 12-month receipts are down 20% in just 14 months, while spending is up by …. well, if you can figure that one out, go ahead. There are reported expenditures, TARP disbursements (treated as “investments”), plus whatever the Fed, the FDIC and heaven knows who else have been doling out without accountability in the background. Based on what is known, it looks like the minimum increase only in reported expenditures on September’s Monthly Treasury Statement (due out on October 12 or 13) plus TARP disbursements carried as “investments” will be $700 billion in fiscal 2009 over fiscal 2008.

Social Security isn’t the only place where the train wreck is at the station.

Latest Pajamas Media Column (‘Social Security: The Train Wreck Is at the Station’) Is Up

Filed under: Economy,Soc. Sec. & Retirement,Taxes & Government — Tom @ 8:55 am

SocSecBrokeCard0309It’s here.

It will go up at BizzyBlog on Saturday (link won’t work until then) when the blackout expires.

______________________

Left on the cutting room floor: I wish I would have had the space to suggest a couple of partial solutions.

I’ll acknowledge that they only nibble at the Social Security system’s long-term financial problems, but they would also positively influence the currently tanked economy, which could use more than a little bit of that.

The first and most obvious thing to do is to end Social Security’s earnings penalty, which currently does the following:

Question: How much can I earn and still receive Social Security (old age program) benefits?

Answer: SSA uses the formulas below, depending on your age, to determine how much your benefit must be reduced:

  • If you are under normal (or full) retirement age (FRA): when you start getting your Social Security payments, $1 in benefits will be deducted for each $2 you earn above the annual limit. For 2009 that limit is $14,160; and for 2008, that limit is $13,560. Remember, the earliest age that you can receive Social Security retirement benefits remains 62 even though the FRA is rising.
  • In the year you reach your FRA: $1 in benefits will be deducted for each $3 you earn above a different limit, but only counting earnings before the month you reach FRA. For 2009, this limit is $37,680; for 2008, this limit is $36,120.
  • Starting with the month you reach FRA:, you will get your benefits with NO limit on your earnings.

So between ages 62 and “full retirement age,” which is 66 for current retirees and gradually rising to 67 for future retirees, once you start taking benefits, you can only earn so much before what is substantively a huge tax kicks in. It’s 50% between ages 62 and 65 for recent retirees after a ridiculously low level of earnings, and “only” 33.3% on a moderate level during the next year.

This is highway robbery. A 62 year-old who thinks about earning above the $14,160 cited above quickly realizes that his or her effective tax rate will be 65% or higher (50% Social Security, 15% or more for federal income tax in most cases, plus state and city income taxes). Throw in the cost of and time involved in commuting, and people logically decide it isn’t worth it to earn more than $14,160.

It should be stopped. It’s a Depression-era relic that actually started out at an even higher penalty level, because FDR’s gang of on-the-fly central planners wanted to get seniors out of the workforce:

The earnings penalty was imposed when Social Security began, because FDR’s brain trust thought that the Depression was caused by “too much labor.” “So they intentionally idled seniors,” (The Greedy Hand author Amity) Shlaes writes.

The other step to take is to end the federal income taxation of Social Security benefits. Taxing benefits was a fundamental breach of a decades-old core government promise. It was recommended by the Greenspan Commission in the 1980s, passed by a Democratic Congress and signed by Ronald Reagan, in what was perhaps the biggest economic policy mistake of his presidency. At that time, once a person’s earnings from all sources exceeded what was at the time a well above middle income level (for retirees), taxpayers had to report 50% of their Social Security benefits on their federal 1040. The amounts involved for single and joint filers were not indexed for inflation.

In 1993, the Clinton tax hikes increased the reportable percentage to 85% for many.

Here’s how it works today:

About one-third of people who get Social Security have to pay income taxes on their benefits.

  • If you file a federal tax return as an “individual,” and your combined income is between $25,000 and $34,000, you may have to pay taxes on 50 percent of your Social Security benefits. If your combined income is more than $34,000, up to 85 percent of your Social Security benefits is subject to income tax.
  • If you file a joint return, you may have to pay taxes on 50 percent of your benefits if you and your spouse have a combined income that is between $32,000 and $44,000. If your combined income is more than $44,000, up to 85 percent of your Social Security benefits is subject to income tax.

If you are married and file a separate return, you probably will pay taxes on your benefits.

“Income” as treated above is defined as “the sum of your adjusted gross income plus nontaxable interest plus one-half of your Social Security benefits.”

The amounts listed above are still not indexed for inflation. I also believe that closer to one-half of people who get Social Security old age program benefits have to pay income taxes on their benefits (the above quote is based on all who receive benefits, including disability).

The taxation of benefits amounts to a means testing Americans were promised would never happen when the program was enacted.

Ending the earnings penalty and the taxation of benefits would free up seniors who wish to earn more to work as long and as hard as they would like. 8 million seniors earning $15,000 more per year would generate an additional $15 billion in annual payroll tax revenue (6.2% employer-paid taxes plus 6.2% from the employee on $120 billion in earnings is $14.88 billion). The additional federal income tax paid on that earnings, let’s say $20 billion, would be more than what Social Security received from the taxation of benefits in 2008.

Over time, repealing both measures would also help grow the economy faster, increase employment, and broaden the Social Security tax base — assuming that the Obama administration can be distracted from its obsession with growing the power of the federal government long enough to take an interest in any of these things.

The bigger picture is that the Social Security train wreck, brought to us years earlier than was thought even 18 months ago by the people who gave us the POR (Pelosi-Obama-Reid) Economy, which is now the POR Recession/”RepressionAs Normal People Define It, may not be solvable without cutting benefits, increasing taxes (which would further and permanently handicap the economy), or printing money. The system’s monthly deficits are an urgent present problem, not one that’s decades down the road.

Positivity: Actor Eduardo Verástegui visits prisoners to talk about second chances

Filed under: Positivity — Tom @ 6:52 am

From Gatesville, Texas:

Oct 1, 2009 / 04:00 am

Mexican movie star Eduardo Verástegui on Wednesday visited Gatesville Prison in Gatesville, Texas to tell prisoners how acting in the movie Bella inspired him to change his way of life and gave him a second chance.

The visit is part of a new program called Jose’s Second Chance, based on the lead character of Jose in the movie Bella. The character was given a second chance after a tragic accident resulted in his imprisonment.

“During my preparation for this role, I realized I was not the man that I had been raised to be and that I wanted to be,” Verástegui said before the visit.

The movie star explained that playing the role of Jose convinced him he could change his ways and “lead a life that I could be proud of” in both his public and private life.

“I’ve dedicated my acting career to only portraying men that are heroes–not like Batman or Superman–but real heroes,” he continued. “Men who are hard- working, men of faith, men who are faithful to their wives … men like my father, and to stop perpetuating stereotypes often associated with Latino actors.

“The next act of our lives has not been written. We can write those chapters by the decisions we make and I want to share this truth with those I will meet today,” the famous Mexican actor said.

Verástegui appeared at the prison at the invitation of Christian prison ministry Discipleship Unlimited.

Jose’s Second Chance is a program launched by the Human Rights, Education and Relief Organization (HERO) in partnership with Manto de Guadalupe, a Los Angeles-based non-profit.

HERO founder Jason Jones, who also was a producer for Bella, joined Verástegui at the prison, where Bella was shown prior to their visit.

“We are grateful for the impact that Bella has made on people,” Jones commented in a press release before going to the prison. He claimed that the movie has saved many lives.

Go here for the rest of the story.