Showing posts with label social security. Show all posts
Showing posts with label social security. Show all posts
8:48 PM
The stock market's gains seem emotional to me. I know optimism is good. "Think positive" is a popular theme. We are positive going into a new year. We should be. Our journey through an ever-changing economic landscape is just beginning. Not every dollar going through our economy goes through Wall Street. But the Wall Street click has a good pulse on what consumers are doing. The market optimism has gained after the fiscal cliff drama has closed.
But what is really coming down the middle-class economy staircase?
We are going to be taxed more. The employee portion of Social Security tax withholding goes up to 6.2% from 4.2% on January 1, 2013. Employers have until February 15th to make the change from the previous rate, but the IRS bulletin on the topic instructs employers to make up any difference due from late adoption by March 31, 2013.
Approximately 79.1% of all U.S. households make less than $100,000 and are therefore subject to the entire impact of the Social Security tax. How much less will these households be taking home? Assuming a household makes $50,000 per year, that's $1,000.
Companies that rely on the middle-class consumer are going to face new challenges. However these challenges are going to exhibited in the market when they hit home, not before. After all, we're having too good a time.
But what is really coming down the middle-class economy staircase?
We are going to be taxed more. The employee portion of Social Security tax withholding goes up to 6.2% from 4.2% on January 1, 2013. Employers have until February 15th to make the change from the previous rate, but the IRS bulletin on the topic instructs employers to make up any difference due from late adoption by March 31, 2013.
Approximately 79.1% of all U.S. households make less than $100,000 and are therefore subject to the entire impact of the Social Security tax. How much less will these households be taking home? Assuming a household makes $50,000 per year, that's $1,000.
Companies that rely on the middle-class consumer are going to face new challenges. However these challenges are going to exhibited in the market when they hit home, not before. After all, we're having too good a time.
12:49 PM
- Obama and Boehner pick up talks where they left off.
- A big drop in the stock market sends a message.
- The government goes off the fiscal cliff.
- No deal for at least six weeks.
- Boehner calls a House vote on what President Obama wants.
- A partial deal is struck.
- Stock markets hang in there and President Obama and Congress think the fiscal cliff isn't so bad.
Obama has dropped his proposal to extend a temporary cut in Social Security payroll taxes paid by 163 million workers. Republicans want that tax to go back up.Obama is offering to reduce cost-of-living increases for Social Security recipients. Republicans have been seeking this as a key to long-term deficit reduction. Obama continues to reject the Republican plan to raise the eligibility age for Medicare from 65 to 67. Boehner now says raising the eligibility age is not essential. Obama and Boehner both propose raising taxes on dividends and capital gains from 15 percent to 20 percent.
CNBC source story #2
9:16 AM
Nervousness. That's the best way to describe the mood of the markets. That mood has not entirely filtered across the national spectrum regarding the economy. Close though. Retail spending is low. Which in a way is good. That tells me that households are indeed watching their spending. But, with an economy geared towards spending, that doesn't sit well with the big banks and hedge funds. Wall Street, as a whole, has been watching for the bright and shining light to bring the American economy out of darkness. Alas, that light has not been shown.
Housing is still down. There has been a rise in home construction to be sure. But realize just how much new building needs to happen to create more jobs. We need about 400,000 to 600,000 jobs a month, for I don't know how many months, to get unemployment down to 10 year ago levels.
The DJIA is hovering at the 13,000 level. To be sure there are those who say a new bull market is within reach. But realize that more and more money is being taken out of the stock market practically daily. Is there the push to bring in a new bull?
Everything going wrong with the U.S. economy has to do with our massive debt levels. The current national debt grossly exceeds 15 trillion dollars. But don't miss seeing the bigger picture. Along with that the U.S. government is also sitting on 84 trillion dollars in unfunded liabilities in Social Security, Medicaid, and other entitlement programs. Nearly 100 trillion dollars total!
To put it in perspective, if you spent 1 dollar every second, every single day, every single year..... it would take 31,000 years to spend just 1 trillion dollars. Now multiply that by 100.
Divided by every citizen of the United States, this equates to to more than 318,000 owed by every citizen in the U.S. During the Obama administration more debt has been racked up than the administrations of George Washington through George H.W. Bush (Bush 41) combined. This is the component that could unhinge our global economy. One analyst on CNBC talked about Europe, but asked what about the United States. Seems we are not looking in our own backyard.
Fox News reported in August 2011, American debt had already surpassed its entire 2010 GDP of 14.53 trillion dollars.
The U.S. government borrows four out of every ten dollars it spends. Our Social Security taxes (what you and I pay through income taxes) have 40 percent going to pay the INTEREST on the debt.
Without borrowing money to fill its quarter of the GDP and cover the national debt, 10 percent of our economy could vanish. It's looking more and more likely to prevent this is to raise the debt ceiling. That obviously will bring a fight in Congress.
The Treasury Borrowing Advisory Committee is in fear of a massive sell-off of Treasury bonds by foreign investors. This could place another 75 billion dollars on taxpayers. This also would increase mortgage lending rates. Treasury Secretary Geithner reported that the debt ceiling debate will come AFTER November's election day. His timing is off!
The mudslinging has already begun. Speaker John Boehner has said no to a rise in the debt ceiling. We very well can't operate without a rise. Not raising the debt ceiling could put the entire market in peril. Prices for core goods will rise, another collapse of the housing market could happen, and a destruction of wealth is sure to overtake us.
As much as I wish to keep more debt from happening, a rise in the debt ceiling has to happen. After that, than what?
QE3, that's what.
I wrote earlier that Geithner's timing was off. When will it be? I say at the end of September. There most likely will be monumental events that will happen to the U.S. economy to put the debt ceiling debate into gear. Look at the Treasury auction results. If you see those auctions starting to falter, that's the trigger. Bernanke will make the case for more easing by the Fed. These events will just "kick the can" down the road some more and we'll deal with it in the new year, no matter who the president is.
Housing is still down. There has been a rise in home construction to be sure. But realize just how much new building needs to happen to create more jobs. We need about 400,000 to 600,000 jobs a month, for I don't know how many months, to get unemployment down to 10 year ago levels.
The DJIA is hovering at the 13,000 level. To be sure there are those who say a new bull market is within reach. But realize that more and more money is being taken out of the stock market practically daily. Is there the push to bring in a new bull?
Everything going wrong with the U.S. economy has to do with our massive debt levels. The current national debt grossly exceeds 15 trillion dollars. But don't miss seeing the bigger picture. Along with that the U.S. government is also sitting on 84 trillion dollars in unfunded liabilities in Social Security, Medicaid, and other entitlement programs. Nearly 100 trillion dollars total!
To put it in perspective, if you spent 1 dollar every second, every single day, every single year..... it would take 31,000 years to spend just 1 trillion dollars. Now multiply that by 100.
Divided by every citizen of the United States, this equates to to more than 318,000 owed by every citizen in the U.S. During the Obama administration more debt has been racked up than the administrations of George Washington through George H.W. Bush (Bush 41) combined. This is the component that could unhinge our global economy. One analyst on CNBC talked about Europe, but asked what about the United States. Seems we are not looking in our own backyard.
Fox News reported in August 2011, American debt had already surpassed its entire 2010 GDP of 14.53 trillion dollars.
The U.S. government borrows four out of every ten dollars it spends. Our Social Security taxes (what you and I pay through income taxes) have 40 percent going to pay the INTEREST on the debt.
Without borrowing money to fill its quarter of the GDP and cover the national debt, 10 percent of our economy could vanish. It's looking more and more likely to prevent this is to raise the debt ceiling. That obviously will bring a fight in Congress.
The Treasury Borrowing Advisory Committee is in fear of a massive sell-off of Treasury bonds by foreign investors. This could place another 75 billion dollars on taxpayers. This also would increase mortgage lending rates. Treasury Secretary Geithner reported that the debt ceiling debate will come AFTER November's election day. His timing is off!
The mudslinging has already begun. Speaker John Boehner has said no to a rise in the debt ceiling. We very well can't operate without a rise. Not raising the debt ceiling could put the entire market in peril. Prices for core goods will rise, another collapse of the housing market could happen, and a destruction of wealth is sure to overtake us.
As much as I wish to keep more debt from happening, a rise in the debt ceiling has to happen. After that, than what?
QE3, that's what.
I wrote earlier that Geithner's timing was off. When will it be? I say at the end of September. There most likely will be monumental events that will happen to the U.S. economy to put the debt ceiling debate into gear. Look at the Treasury auction results. If you see those auctions starting to falter, that's the trigger. Bernanke will make the case for more easing by the Fed. These events will just "kick the can" down the road some more and we'll deal with it in the new year, no matter who the president is.
11:30 AM
The baby boomer generation - those born in the years following World War II up to about 1957 - comprises an estimated 77 million Americans. Those boomers are just starting to hit the traditional retirement age, with a major surge still to come over the next 15 years.
The country is ill-equipped to deal with this influx of people onto the Social Security rolls. It's not ready for the Medicare hit either. Back in 1950 there were 16 workers for every retiree. The system was well-funded by that metric. Today, there are only about 3 workers per retiree.
Social Security, in fact, is even more troubled than the calculation suggests. That's because everything you are paying into the Social Security system now as a worker is being borrowed to pay down the massive U.S. budget deficit. Yes, it's true.
When we here we are borrowing an unbelievable 40 percent of our federal government's daily expenditure, that's glossing over a key point. About half of our tax revenue now comes from Social Security taxes! Around 50 percent of Americans pay no income tax, but they do pay Social Security tax. Take away Social Security tax, then the federal government is actually borrowing about 70 percent of our current expenditures.
Social Security is not a pension plan. It is a transfer payment. That transfer payment will be under extreme pressure when we no longer borrow and print without spurring very high, unsustainable inflation. When that day comes comes, Social Security transfer payments will have to decrease. Instead of everyone getting a check, the program will become means tested.
Social Security will become a welfare payment. If you really need welfare, you will receive some level of Social Security. Consider all that money you paid into the system as a tax on your earnings.
Don't count Social Security as part of your retirement savings. It quite likely won't be there for anyone who have enough to be over the means-tested threshold. It will be nothing more than a safety net, not a savings that provides income.
The country is ill-equipped to deal with this influx of people onto the Social Security rolls. It's not ready for the Medicare hit either. Back in 1950 there were 16 workers for every retiree. The system was well-funded by that metric. Today, there are only about 3 workers per retiree.
Social Security, in fact, is even more troubled than the calculation suggests. That's because everything you are paying into the Social Security system now as a worker is being borrowed to pay down the massive U.S. budget deficit. Yes, it's true.
When we here we are borrowing an unbelievable 40 percent of our federal government's daily expenditure, that's glossing over a key point. About half of our tax revenue now comes from Social Security taxes! Around 50 percent of Americans pay no income tax, but they do pay Social Security tax. Take away Social Security tax, then the federal government is actually borrowing about 70 percent of our current expenditures.
Social Security is not a pension plan. It is a transfer payment. That transfer payment will be under extreme pressure when we no longer borrow and print without spurring very high, unsustainable inflation. When that day comes comes, Social Security transfer payments will have to decrease. Instead of everyone getting a check, the program will become means tested.
Social Security will become a welfare payment. If you really need welfare, you will receive some level of Social Security. Consider all that money you paid into the system as a tax on your earnings.
Don't count Social Security as part of your retirement savings. It quite likely won't be there for anyone who have enough to be over the means-tested threshold. It will be nothing more than a safety net, not a savings that provides income.