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alstry (35.42)

How Do You Cover A $2 Trillion Dollar Deficit?

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August 14, 2009 – Comments (21)

Surcharge the top 20% of taxpayers $100,000 or cut 10,000,000 government workers?

Once you put a $2 Trillion dollar deficit in perspective, it is a very very large number.....and with tax receipts declining, it is on track to get even larger.

The problem is many of the top 20% of taxpayers don't have $100K to tax.  Would could tax the top 10% $200K, but the same problem exists.  Same with the top 5% $400K.

Anyone think this may be an issue that few seem to want to discuss right now?

How does our nation bridge a $2 Trillion dollar deficit when tax receipts are declining?

If we simply print, will money be worthless?

21 Comments – Post Your Own

#1) On August 14, 2009 at 9:20 AM, alstry (35.42) wrote:

Combine the above MASSIVE deficit with falling prices, unprecedented debt level, and a ZOBULATION depression inducing policy and we have one hell of a hurdle to overcome.

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#2) On August 14, 2009 at 9:33 AM, alstry (35.42) wrote:

THIS IS NOT GOING TO HELP ANY....

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#3) On August 14, 2009 at 9:58 AM, alstry (35.42) wrote:

2% IS NOT ENOUGH...

I searched all over the newspapers and TV transcripts and no one asked the President what is probably the most important question of what passes for debate on the issue of health care reform: $80 billion of WHAT?

On June 22, President Obama said he'd reached agreement with big drug companies to cut the price of medicine by $80 billion. He extended his gratitude to Big Pharma for the deal that would, "reduce the punishing inflation in health care costs."

Hey, in my neighborhood, people think $80 billion is a lot of money. But is it?

I checked out the government's health stats (at HHS.gov), put fresh batteries in my calculator and totted up US spending on prescription drugs projected by the government for the next ten years. It added up to $3.6 trillion.

In other words, Obama's big deal with Big Pharma saves $80 billion out of a total $3.6 trillion. That's 2%.

Hey thanks, Barack! You really stuck it to the big boys. You saved America from these drug lords robbing us blind. Two percent. Cool!

http://www.huffingtonpost.com/greg-palast/obama-on-drugs-98-cheney_b_258209.html

IS IT JUST ALSTRY.....OR IS SOMETHING BIG ABOUT TO HAPPEN?

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#4) On August 14, 2009 at 10:15 AM, dickseacup (66.90) wrote:

I will go out on a limb and say that something will happen, between 16 and 22 AUG. 

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#5) On August 14, 2009 at 10:19 AM, jddubya (< 20) wrote:

It is just Alstry

(1st comment on this one blog)

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#6) On August 14, 2009 at 11:42 AM, mliu01 (< 20) wrote:

If we confiscate all the money billionair have. we will get 400 to 600 billions. And that is it.

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#7) On August 14, 2009 at 11:49 AM, mliu01 (< 20) wrote:

Heck we spend 100b a year on wars. for almost 10 years now.

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#8) On August 14, 2009 at 11:54 AM, alstry (35.42) wrote:

mliu,

We spend a lot more than that, and now we are ramping up spending even more by sending more toops over......

And if we stripped the billionairs of all their savings, it would only cover a fraction of the deficit this year....what are we going to do next year when more are unemployed?

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#9) On August 14, 2009 at 11:56 AM, leohaas (31.56) wrote:

You borrow $2 trillion!

And when the deficit spending has saved us from total collapse, and the economy recovers, you pay it back by raising taxes and cutting spending, preventing the next bubble. Just like Keynes predicted.

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#10) On August 14, 2009 at 12:00 PM, alstry (35.42) wrote:

leo,

it is one thing to borrow a few hundred billion when your tax receipts are growing and economy expanding, it is quite a different thing to borrow a few TRILLION against an evaporating tax base.

We are dealing with a bleed that this nation has never seen before......now we will have to see how it reacts.

There is no nation in the world that can afford to lend us $2 Trillion dollars, in the last 1000 years, China has managed to accumulate only $800 Billion in US treasuries.

The credit card is getting maxed out, the question is when do we hit our limit.....when we do, that is where the interesting part begins.

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#11) On August 14, 2009 at 1:42 PM, JerseyShoreGirl (< 20) wrote:

Here's my 2 cents today:

1) My husband keeps a 'model' that has proven to be very accurate .. and he said it's going NUTS right now .. he sees a big downturn coming .. he even called me to say "maybe there is something to that 9.09 thing"

2) Heard this 80's song the other day .. listen to the lyrics and see it they have new meaning for you today .. Eddie Grant's "Electric Avenue"

http://www.youtube.com/watch?v=UA5MtAmT24g

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#12) On August 14, 2009 at 1:50 PM, Eudemonic (64.69) wrote:

alstry: Relatively speaking, how does this current US deficit, compare with other countries', past or present deficit? Ecuador in the 90s, and Argentina come to mind but there may be other good examples. I want to truly understand this boondogle.

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#13) On August 14, 2009 at 2:03 PM, detroitdea (< 20) wrote:

"How Do You Cover A $2 Trillion Dollar Deficit?"

"Surcharge the top 20% of taxpayers $100,000 or cut 10,000,000 government workers?"

Let's look at the numbers based on 2007.

http://en.wikipedia.org/wiki/Household_income_in_the_United_States

Referencing the paragraph, Aggregate Income Distribution:

"In 2007, all households in the United States earned roughly $7.896 trillion"  

Household incomes:

>$200K equaled 3.65% of households and 17.5% of all income ($1.4 Trillion)

>$150K equaled 8% of households and 28.5% of all income ($2.25Trillion) 

>$100K equaled 20% of households and 49.98% of all income ($3.95Trillion)

$50K to $95K equaled 18.2% of households and 16.5% of all income ($1.3Trillion)

The lowest 10.3% of households made 1.06% of all income ($83.7Billion) 

In 2007, our Gross Domestic Product was $13.84Trillion.

http://en.wikipedia.org/wiki/Federal_tax_revenue_by_state

Of which the Federal Government collected about $2.674Trillion in Federal Taxes (individual and Corporate)

If you take the group of households with incomes larger than $100K which is representative of about $3.95Trillion of total income and tax them at a flat rate of 38%, the tax revenues would be about $1.5Trillion.  

Then if you take the households from $50K to $95K which is $1.3Trillion of all income and tax them at a flat rate of 38%, the tax revenue would be about 495Billion dollars

Add these two up and you get about $2Trillion

Other fellow members please fill in the holes in this rough analysis since I am no expert.   

 http://www.detnews.com/article/20090807/METRO/908070402

The furloughs that Alstry has pointed out is the simplest way for the state government cut costs as does corporate america.

Its becoming clearer to me that without increased GDP, cutting jobs is like chasing our tail to balance budgets since the tax base is reduced.  Those left with jobs and those future employees will be expected to take on greater tax burdens.  

If we assume that the tax burden will fall upon the average working citizen, then I do believe that Altry's idea to restructure the debt of the average citizen is quite brilliant.  

The question is how would we execute this mass debt restructuring.  

Its happening right now with individuals on a case by case basis through foreclosures, short sales, loan modifications, negotiations credit card debt etc.  

Those methods that are most effective are those that allow us to restructure these debts while we still have income.  

And as noted by Alstry,  the amount of debt restructured or forgiven will be taxable.  

 It would be a subtle tax that might be more palatable then a substantial tax rate increase across the board on a fewer number of people.  

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#14) On August 14, 2009 at 2:35 PM, leohaas (31.56) wrote:

"...it is one thing to borrow a few hundred billion when your tax receipts are growing and economy expanding, it is quite a different thing to borrow a few TRILLION against an evaporating tax base."

According to Keynes, borrowing when tax receipts are growing and the economy is expanding, is the exact WRONG thing to do. When the economy is expanding at a healthy clip, paying down debt is what is required. It is what happened during the second Clinton term. Too bad Bush did not understand this principle. Come to think of it, neither do you...

In addition, we are not borrowing against an evaporating tax base. Sure, the tax base is declining right now (and would have a lot faster if we had not done any deficit spending), but the tax base will start growing again once we come out of this recession. It is against that future growth we are borrowing.

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#15) On August 14, 2009 at 4:04 PM, afreakout (91.95) wrote:

Both Leohaas and Alstry are wrong.  The truth is that we will issue debt and then buy it ourselves with money we pull out of thin air and then simply retire the purchased debt.  Though hopefully not quite that conspicuously.  Our deficit is obviously far too large to justify.  But in my opinion it wil not be national debt which takes us down but exchange rates.  Exchange rates which will eventually allow inflation to seep into the US, being the major net importer that it is.  Wasn't that already happening before this crisis? 

 

Anyway, Alstry..you're on the right track but you seem to underestimate the magical powers of the treasury and fed.  Not to mention the willingness of the world to keep taking US dollars.  So far it's not the US that has been zombulated..but the rest of the world! You think the treasury and fed have to balance their checkbook?  Please!  It will be up to the world to bring about what you speak of.  We won't be doing it to ourselves when we are the issuers of our own money.  Perhaps you have a sense of justice and fairness which would lead you to punish yourself for acting this way.  The treasury/fed are obviously guided by a different impulse.  

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#16) On August 14, 2009 at 4:07 PM, jddubya (< 20) wrote:

From comment #8 on 8 /7/09 from this blog:

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=240107&t=01002130057764754273

"Going forward I will substantially reduce my blogging as this post pretty much sums things up."

Well, you've totally blown any respect I might have had for you by not keeping to your word, among a slew of other things.

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#17) On August 14, 2009 at 5:07 PM, alstry (35.42) wrote:

jd,

right now you have done nothing to justify any respect from me....so if you really think about it, your perspective really doesn't matter.  But obviously, you are addicted to my perspective.

Strange personality to be addicted to something he doesn't respect....especially for someone who can't even score 1/4 my score after I just lost 6X times your score......

my suggestion to you, go someplace you can respect, because by playing here, you obviously have no self respect.......but that is obvious from your comments.

As far as reducing my blogging, I am down over 50% pace from my previous pace since making that comment....for the Institute of Alstrynomics, a 50% reduction is considered substantial.

 

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#18) On August 14, 2009 at 5:21 PM, alstry (35.42) wrote:

"In 2007, all households in the United States earned roughly $7.896 trillion"  

Detroit,

Thanks for using a real number.  I use about $8 trillion simply because it is easier to computate.  The problem is that much of that $8 Trillion dollar number comes directly from government payments.

Government has about 22,000,000 million people on the payroll.  At an averate total cost of $75K per employee, we are looking at about $1.5 Trillion.  The medical industry benefits from over $1 trillion dollars in health care payments.  The military and secutity industry benefits from about $1 Trillion dollars in payments.  And the welfare support industry benefits from about $1 Trillion dollars in payments. 

Once you factor the mulitplier effect, you can see that over half the income in America comes from government payments.  The problem is government doesn't generate the income anymore to make those payments.  Once you factor state, local and federal deficits.....we are approaching $3 trillion shortfall, or most of the money necessary to keep our government  and incomes going.

As far as I know, I am the only person who is analyzing this way in the country.  I have run this by a few former CEO's and CFOs of publicly traded companies.....initially their reaction is like a deer in the headlights.....then once the enormity of the situation sets in......it is clear that whatever is coming, it will be something so large that it will qualify for MOAP.....the mother of all projections.

WHAT MAKES THIS SO DIFFERENT THAN THE PAST IS HOW MUCH GOVERNMENT HAS GROWN IN RECENT YEARS......TODAY GOVERNMENT IS APPROACHING 7 TRILLION DOLLARS, TEN YEARS AGO, GOVERNMENT WAS JUST 1/3 OF THE SIZE IT IS TODAY.

THERE IS SIMPLY NO WAY TO CUT 2/3 OUT OF THE SIZE OF GOVERNMENT WITHOUT MASSIVE DISRUPTIONS.

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#19) On August 14, 2009 at 5:39 PM, alstry (35.42) wrote:

YOUR MILITARY IS GETTING PREPARED....ARE YOU PREPARED?

The Pentagon has approached Congress to grant the Secretary of Defense the authority to post almost 400,000 military personnel throughout the United States in times of emergency or a major disaster.

This request has already occasioned a dispute with the nation’s governors. And it raises the prospect of U.S. military personnel patrolling the streets of the United States, in conflict with the Posse Comitatus Act of 1878.

In June, the U.S. Northern Command distributed a “Congressional Fact Sheet” entitled “Legislative Proposal for Activation of Federal Reserve Forces for Disasters.” That proposal would amend current law, thereby “authorizing the Secretary of Defense to order any unit or member of the Army Reserve, Air Force Reserve, Navy Reserve, and the Marine Corps Reserve, to active duty for a major disaster or emergency.”

Taken together, these reserve units would amount to “more than 379,000 military personnel in thousands of communities across the United States,”

http://www.progressive.org/wx081209b.html

The governors were not happy about this proposal, since they want to maintain control of their own National Guard forces, as well as military personnel acting in a domestic capacity in their states.

“We are concerned that the legislative proposal you discuss in your letter would invite confusion on critical command and control issues,” Governor James H. Douglas of Vermont and Governor Joe Manchin III of West Virginia, the president and vice president of the governors’ association, wrote in a letter back to Stockton on August 7. The governors asserted that they “must have tactical control over all . . . active duty and reserve military forces engaged in domestic operations within the governor’s state or territory.”

According to Pentagon public affairs officer Lt. Col. Almarah K. Belk, Stockton has not responded formally to the governors but understands their concerns.

9.09...........

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#20) On August 14, 2009 at 5:45 PM, alstry (35.42) wrote:

IS ISRAEL GETTING PREPARED TOO?

The Bank of Israel on Tuesday will stop its program of buying $100 million on a daily basis but reserve the right to intervene in the foreign-currency market, the bank announced Monday.

http://www.jpost.com/servlet/Satellite?cid=1249418575155&pagename=JPost%2FJPArticle%2FShowFull

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#21) On August 14, 2009 at 6:08 PM, Starfirenv (< 20) wrote:

Dude, you remind me of how prepubiscient teens treat each other when they have a crush on each other. I, for one, am interested in current, relevent, quantifiable, verifiable (read Alstry's contribution) input in these unprecedented times.  Facts are facts and prediction and conjecture are just that. Methinks our jobs as citizens, Americans and parents is to be as educated as possible and stand up for our common cause and future. Seems your retorts are as common as Al's posts. So, maybe if you spent as much effort putting something on this forum worthy of ponderence or an enlightening discussion as you do nit-picking, you could actually be a plus to this community. You can do it!!!!!!!  +1 rec for "strange personality"

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