War is Making You Poor Act
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
For those of you who are concerned about government spending being out of control, and subsequently the risk of increasing taxes, I thought you might be interested in this bill:
http://en.wikipedia.org/wiki/War_Is_Making_You_Poor_Act
Lastly, since I know there are some people not quite bright enough to understand that the title of a post may be representative of the subject matter within the post (as opposed to a personal opinion from the poster), let me point out that the title of this post is representative of the subject matter within this post, and not necessarily a personal opinion of the poster.
Jason, why do you think middle class people need a break? I actually think it is the middle class people who are sucking the country dry. Do you agree that middle class people are the majority of voters? And that politicians are already pandering to them?
I actually think we live in times that Marx would approve of. The proletariat in a white-collar society is the middle class. They run the show and it is very easy for politicians to gain votes by railing against rich people.
I do not see why rich people have to pay a disproportionate share of the nation's taxes. I agree with Bryan that we need to simplify the tax code - for example, by eliminating the income tax and replace it with a national sales tax.
Even the sale tax will end up with rich people paying more than their share simply because they buy more stuff. But at least it will be unrelated to income, which is an unfair basis to tax people. (Another advantage of a sales tax is that it is more stable and does not result in big dips or increases in government revenues.)
P.S. I have not read the article about military spending yet and will do so. I am sure we waste a few hundred billion there.
I don't think taxes are going to rise appreciably...at least income taxes. The taxes that will bury this country in the near term are:
1. Inflation tax
2. Tax on inflation tax
Inflation taxes are overall taxes on assets denominated in dollars. Monetization of the debt is all but certain going forward given that our elected officials continue to spend money like drunken sailors.
An additional kick in the nuts will be when the gov-mint taxes this "gain" that is in nominal terms...for a tax on inflation tax. It is good to be the government!
Bryan -
I completely agree with you...
Historically speaking, taxes are very low right now (the lowest in 60 years according to the Tax Policy Center), and while they'll probably increase a bit over the next couple years, they will continue to be low relative to recent levels of taxation in this country.
All that said, reducing Federal income tax at the lower end of the income spectrum would hopefully alleviate some of the pressure middle class folks are having making ends meet and ensuring their families have the basic necessities -- a good thing in my book...
The tax system in this country is an abortion. My mom worked for the dreaded IRS for 30 years (and knew most of the IRS agents that had a plane run into their building in Austin recently) and doesn't pretend to scratch the surface of understanding the tax code.
I would be all of drastically simplifying it so that I don't have to play all of the silly little games to hide income and reduce taxes. Sadly this will never happen because this industry employs too many people and will lobby too hard to keep the status quo. Honestly I have more of a problem paying the tax maze preparers than I do the government. At least I get SOME tangible benefit from the government. Legions of tax preparers sifting through a maze of code is a bunch of wasted synapse firings to me. We need these smart folks engineering things to make our lives better...not playing chicken with the IRS over ridiculous tax codes.
Agreed with everything you said, Bryan...great points...
And unfortunately, most of these tax preparers aren't any smarter than a copy of TurboTax, asking questions and punching in the answers. So, most consumers (including many business people) who think they're getting the benefit of using a paid tax preparer (over a computer program or over doing it themselves) are really only spending more to get the same...
Sad when even most of our tax professionals can't figure out how to tax advantage of our tax code...
It's a lose/lose all around, except for the IRS...I guess that explains everything...
Jason, why do you think middle class people need a break? I actually think it is the middle class people who are sucking the country dry. Do you agree that middle class people are the majority of voters? And that politicians are already pandering to them?
I actually think we live in times that Marx would approve of. The proletariat in a white-collar society is the middle class. They run the show and it is very easy for politicians to gain votes by railing against rich people.
I do not see why rich people have to pay a disproportionate share of the nation's taxes. I agree with Bryan that we need to simplify the tax code - for example, by eliminating the income tax and replace it with a national sales tax.
Even the sale tax will end up with rich people paying more than their share simply because they buy more stuff. But at least it will be unrelated to income, which is an unfair basis to tax people. (Another advantage of a sales tax is that it is more stable and does not result in big dips or increases in government revenues.)
P.S. I have not read the article about military spending yet and will do so. I am sure we waste a few hundred billion there.
Instead, I'm suggesting that we examine the waste in the system, of which defense spending has a tremendous amount, and pass the savings on to the taxpayer -- whether that be the middle-class or otherwise.
Don't get me wrong -- I'm all for spending on necessary defense of this country, but as an example, we're still spending billions on cold-war era expenses to keep cold-war era defense plans in place that aren't necessary.
As some high up in the military have already suggested, a complete overhaul of defense spending needs to be made (and before I'm attacked, I think we also need a complete overhaul of welfare spending as well). No doubt there will be tremendous savings, and I'm all for using these savings to both balance the budget and then give tax breaks where they're most needed.
Personally, I think that's the middle class, but I'm not tied to that idea. If you were to argue that the tax breaks should be across the board (or targeted to specifically needy/worthy groups), I could get on board with that as well.
My main point isn't that the tax breaks should go to the middle class but that we should reexamine budgets in order to balance the budget and give tax breaks at all.
And, of course, simplifying the tax code is tremendously important as well. Unfortunately, unless we elect a libertarian, I don't see that happening anytime soon...
Don't agree with everything he stands for, but certainly more than most of the other politicians out there...
Military spending may seem like a waste to some given that we spend 10 times as much as our nearest "competitor," but this needs to be balanced against the fact that we maintain a staff of very smart people to develop new weapons if the crap ever hits the fan. Given our loose policies about keeping engineering talent in the country I can guarantee you that it will be a major undertaking to ramp up scientific and engineering skillsets if we don't throw tax money at people to keep them interested in the industry.
My wife and I are both electrical engineers and I can tell you with certainty that we both would have exited the industry immediately if we were forced to compete with Indian labor for industry jobs coming out of school.
This country suffers from severely misplaced priorities when tax maze preparers and strategists are paid much more and have better security than engineers and scientists.
Income taxes have brought in around 18% of GDP plus or minus 1-2% over the last several decades regardless of how the tax policy is changed. If the dems change things to "tax the rich" people simply create better ways to shelter money, cheat, etc.
Taxing income at a higher marginal rate won't work. Cutting spending, monetizing the debt, and confiscating wealth from "the rich" are the only viable options to close the gap.
I agree there is waste. There is also necessary stuff masquerading as waste in the interest of reliability.
My big chopping component is entitlements...not defense spending. I agree that both could use a good slimming though given that we are broke.
One thing to remember about military spending is that only a fraction of it goes towards procurement of new hardware. Most military spending in most countries goes towards the compensation of people, routine maintenance, supplies and ammunition, etc. None of those things have any positive technology spin-offs for the economy.
From an economic perspective, the possible civilian technological benefits of military research is not a good argument because we would rather have the money focused on civilian technology than on military technology that could serendipitously have a civilian benefit.
Having said that, I do like the idea of any technology that would save lives - either of our soldiers or of innocent civilians who so often get killed and are called "collateral damage." One of my most disturbing moments during my RE business was walking into a house and seeing a folded flag there. My agent at that time, a former navy guy, told me that it was in memory of the owner's son who had died in Iraq. A lot of these people who are dying look like kids who have not even fully reached adulthood. Very sad.
The military obviously needs to be strong given that there are a bunch of bad people that want to kill us. However, this needs to be balanced with our long-term interests. If we are too broke to get out of debt and our bond ratings go way down we pay more to roll over the debt that has an average duration of 4 years.
Guess what happens then! Then we pay double or triple what we are currently paying just to service debt and we HAVE to cut military spending. What is worse...cutting it some now or being forced by the bond markets to cut it a lot later. Both are arguably bad options, but I think most people would agree that the 2nd option is much worse...especially if it comes at a time when we need to fend off someone trying to attack us in a real crapstorm.
Scott Burns has a great book called, "The Coming Generational Storm" that everyone should read that is concerned about the course of our nation.
I also think we need to evaluate our military goals. We are conveniently located in one corner of the planet with Canada and Mexico as neighbors. It made sense for us to be the policeman of the world when we had 40% of the world's GDP. It does not make sense for us to have such a large role in the world when we are no longer such a dominant economy and are in rapid relative decline.
Let the rest of the world deal with problems in their neighborhoods and we can just focus on being very aggressive against anyone who threatens us directly and being passive with respect to other problems.
I also think oil supplies are not worth protecting with military action. If you do a present value analysis of the extra cost of protecting gulf oil supplies, for example, against the extra expense paying higher oil prices, it may make sense to not intervene.
I think we may be forced to not be the policeman, but that policy of appeasement didn't work too well in the build-up to WWII.
Having a defense budget 10X our nearest competitor does seem extreme though. It seems that we can do pretty well at 5X or so or possibly even lower.
One of the big "problems" (please don't berate me here) is that we value lives so much here. If we were willing to accept more failures with military items they would cost A LOT less. Testing and verification drive the cost of items up significantly. Absent these very harsh requirements the cost would go down an order of magnitude.
Entitlement promises long-term make our military spending look like child's play though. That is what will need to be fixed to keep us solvent.
I do not think we are appeasing anyone if we decide to stay out of something that does not concern us. The WWII example is not what I was referring to - in that case, we had a megalomaniac with ambitions sufficient to threaten the entire globe.
My main concern right now is China. China's spending is growing so rapidly that we will find it very tempting to match it. The problem is that China's economy is on a trajectory that is going to make it much larger than ours (unless we allow massive immigration) and we will simply not be able to match it beyond the next two or three decades.
I think a good strategy for us right now would be to make multilateral institutions much stronger and also form stronger alliances with countries around China. Both those measures will allow us to keep our military spending within reason while allowing us to match China's power over the course of the rest of this century.
I don't see China as a major threat like most people do. They basically sell labor at the low end of the value chain. Once their standard of living grows they won't be nearly as competitive as they now are for that function. They have to peg their currency right now to remain competitive. I think China's economy will crash and burn in the next decade.
Having said that it won't be too big of a hurdle for some of the small European countries to overthrow us if we keep spending 2X what we take in for tax "revenues." A sudden jump in our debt service cost by spooked investors could spell mega trouble very quickly. Think taxes DOUBLING. If you think we have a depression right now wait until that happens.
I don't see hyperinflation in the future like what many others on here claim, but I do see painful tax increases via high inflation, entitlement changes (higher age to qualify, lower benefits, or some combination thereof), and more expensive debt of all sorts that dampens economic growth for a long time.
Can we short sale The United States? Any buyers?
You have mentioned a number of things and let me address each one in a separate post so as to not make any one post too lengthy.
China is definitely a long term competitor for global supremacy. Every country has to do what it can with its existing wages and because their wages are lower than ours, they are able to make labor-intensive stuff. But their wages have increased tremendously over the past three decades (since they started economic liberalization) and their businesses have adjusted to that partly by increased productivity and partly through higher value items. It is simplistic and incorrect to think of China as a third world country with low technology and lots of sweatshops. They are that but they are also much more than that - check out great products from companies such as Haier, Huawei or that car company that Warren Buffett invested in.
It is would be a major mistake for our policy-makers to assume that the Chinese phenomenon is a temporary thing that will collapse. Sure, they will have their own economic ups and downs like any other country. But they are on a long-term upswing and even if they reach half our per-capita-income, they would be twice the size of our economy.
We should also understand that China has been one of the two largest economies in the world for about 1700 out of the last 2000 years so what we are witnessing now is not anything out of the ordinary. (The extraordinary period was the 19th and 20th centuries.)
I don't see any European country overthrowing us any time this century. Our economic policies may be lousy, but theirs are no better. They are also too small individually and too divided collectively to be a threat to us.
In addition, their overall strategic interests are not sufficiently different from ours for them to become a serious adversary.
I agree that we will not have hyperinflation. Hyperinflation is not the same as high inflation. Are we likely to have high inflation because of all the money being printed? Maybe in the long run, but not any time soon because we still have a lot of excess capacity in the economy and that's not going to change as long as the bubble has not fully burst.
I agree with you that we will see entitlment changes. We must - the current system is out of control and the world is becoming better for rich people with many countries competing to get rich people to immigrate. I do not think rich people are going to tolerate paying for the majority of the expenses of the middle class for very much longer.
"When John McCain was shot down over Hanoi in 1967, he was flying an A4 Skyhawk. That jet cost $860,000.
Inflation has risen by 700% since then. So Mr. McCain's A4 cost $6.1 million in 2008 dollars. Applying a generous factor of three for technological improvements, the price for a 2008 Navy F18 fighter should be about $18 million. Instead, we are paying about $90 million for each new fighter. "
My wife worked on the F16 program block 60 and I worked on (flight controls and specialty engineering) the F35 Lightning II. I can assure you that people don't understand how complicated the current technology is and how many THOUSANDS of engineers it takes to make sure that we have the best fighters in the world. The bottom line is that it is very expensive and well worth the cost.
Having said that I saw an enormous amount of waste and over engineering. Again...A lot of this cost could be eliminated if we simply are prepared to accept some small probability of failure for projects during the prototype phase.
The F22 was recently cancelled because of the cost. A big problem with that program is that they didn't use common parts and standardize. This was done better on the F35, but there was still a ton of waste from what I could tell.
All of this still pales in comparison to the amount of waste we are going to see when my generation transfers extraordinary amounts of wealth to the baby boom generation via payroll taxes, inflation taxes, etc.
Then we can take the billions of dollars that we save and put them to use to benefit our citizens in other ways...
Well a compelling argument can be made that we have fewer wars BECAUSE nobody wants to mess with us. Our technology is far more advanced than that of countries that would potentially be our adversaries on the battlefield. To me this is a small peace premium to pay relative to blood and guts of young folks and the upheaval of war on our soil.
How would you propose making things more efficient if you were in charge of running the military spending programs? There are only two models to bid contracts...time and materials or firm, fixed-price. If you get 1/2 of the way through either type of project what do you do?...scrap it altogether and completely waste billions of dollars? If you are a military contractor how do you bid building something completely unique accurately? At my last company we built automated test equipment prototypes that were a few million bucks a piece and we couldn't bid properly. Bidding multi billion dollar programs correctly is next to impossible with so many moving parts.
Why all of the focus on military items on this thread? Why not focus on the real problems...like entitlements? The military is certainly a big fat target, but I would argue that this is the last place to cut back even with all of the waste.
There are whole departments that could be eliminated entirely with no loss of value to the ordinary citizen. Why not start there first?
Of course entitlements are a big issue and need to be cut or eliminated completely. The military is also a big part of the budget and also deserves to be optimized. Ideally, all this should be happening at the same time as we would do with our businesses.
I think our wars are mostly our own choice because no state actor is going to attack us - we are too big and too important a country to attack and, equally important, we are simply too far away from any other part of the world to be attacked. Our main concern is individual psychos attacking us either by themselves or through non-state groups such as al qaeda.