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Thread: guess where 1/2 of your tax money is spent ...

  1. #1
    Banned Melonie's Avatar
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    Default guess where 1/2 of your tax money is spent ...

    "Entitlements Consume More Federal Spending
    - By STEPHEN OHLEMACHER, Associated Press Writer
    Tuesday, December 27, 2005

    (12-27) 18:33 PST WASHINGTON (AP) --

    Three growing entitlement programs consumed nearly half of all federal spending in 2004 (WOW!), and budget analysts expect them to make up an even bigger share in the future.

    Social Security, Medicare and Medicaid accounted for more than $1 trillion in the 2004 budget year, according to the Consolidated Federal Funds Report being released Tuesday by the Census Bureau.

    Overall federal spending was $2.2 trillion, an increase of 5 percent from 2003.

    "The total federal spending increase is actually down a bit from recent years," said Gerard Keffer, chief of the Census Bureau's federal programs branch. "It had been running 6 to 8 percent in the past several years."

    For years, Washington has been fighting over how to manage the growth of entitlement programs. Analysts think the fight will continue for years to come.

    "I think it's absolutely essential and inevitable that we are going to reform those programs," said Rudolph Penner, a senior fellow at the Urban Institute, a social issues research organization. "How, is another question. There's very little interest, now."

    President Bush has pushed to overhaul Social Security and establish private accounts, but Congress has balked.

    Critics argue that private accounts would do nothing to slow the growth of Social Security spending — unless benefits are cut, a politically unpopular option.

    Spending on Medicare, the federal health insurance program for the elderly, is set to increase with the introduction of a drug benefit in January.

    The federal government estimates it will spend about $724 billion over 10 years to provide the Medicare drug benefit.

    Other factors contributing to spending increases include an aging population and soaring health care costs, Penner said. The oldest baby boomers will start turning 60 in January, and once they start qualifying for Social Security benefits, costs will grow at an even faster pace.

    Penner said increased spending on entitlement programs eventually will mean less money for other programs and increased pressure to raise taxes.

    "I think they're going to squeeze out all sorts of other spending items," said Penner, former director of the Congressional Budget Office.

    The Census Bureau compiles the federal spending report each year with information from about 50 federal agencies, Keffer said. One purpose is to show how much federal money goes to each state.

    The report excludes spending on foreign aid, international affairs and interest payments on the national debt, a total of about $200 billion in 2004, because those items do not go to individual states, Keffer said.

    It also does not specify spending for the Central Intelligence Agency, the Defense Intelligence Agency or the National Security Agency because those budgets are classified, Keffer said.

    Among the report's findings:

    _ One third of all federal spending went to five states in 2004: California; New York; Texas; Florida; and Pennsylvania.

    _ California led all states with $232 billion.

    _ Wyoming received the least money, $4.4 billion.

    _ Alaska received only $8.4 billion. But with its relatively small population, it led the nation in per capita federal spending, at $12,885 a person.

    _ Nevada received the lowest per capita amount, $5,469 a person.

    _ Defense Department spending was highest in California, Virginia, Texas, Florida and Maryland.

    ___"

    Consolidated Federal Funds Report:

  2. #2
    God/dess Deogol's Avatar
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    Default Re: guess where 1/2 of your tax money is spent ...

    They need to means test a lot of this stuff.

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    God/dess montythegeek's Avatar
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    Default Re: guess where 1/2 of your tax money is spent ...

    Quote Originally Posted by Deogol
    They need to means test a lot of this stuff.
    Why?
    Congress would apply a means test like they do for the alternative minimum tax--that is a means test. They set it 20 years ago and do not index it for inflation so they can raise more money to give away to the folks who vote for them. More bridges to nowhere in Alaksa and Virginia. More Rose Kennedy gardens on some of the most expensive realestate in Boston--30 miles from where Rose lived. More millions to study the TV viewing habits of monkeys who smoke. More Taj Mahal parking garages for Congress at Regan Airport--the poor babies cannot get wet walking 75 feet. A means test is a tax and taxes never go down-they morph to more giveaways.

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    Banned Melonie's Avatar
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    Default Re: guess where 1/2 of your tax money is spent ...

    They need to means test a lot of this stuff.
    I agree that a means test is probably the only politically palatable option to reduce the costs of these entitlement programs ... by reducing or eliminating benefits for people who have saved money over the years, while continuing benefits for people who have spent their money instead of saving it ! This is one of the major reasons that I'm leery of putting too much money into an IRA or 401k ... because it's entirely possible that every dollar you have saved in an IRA or 401k account 20 years from now will mean a dollar that you won't receive from Social Security / medicare.

    More bridges to nowhere in Alaksa and Virginia. More Rose Kennedy gardens on some of the most expensive realestate in Boston--30 miles from where Rose lived. More millions to study the TV viewing habits of monkeys who smoke. More Taj Mahal parking garages for Congress at Regan Airport
    I'm certainly not condoning this sort of 'pork barrel' gov't spending ... and there are of course tons of money being spent on other 'pork barrel' programs you didn't mention. However, in the grand scheme of things, the total dollar value of 'pork barrel' spending at most comprises a few percent of the 1 Trillion dollars plus which is spent on entitlement programs every year.

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    Veteran Member TarynJolie's Avatar
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    Default Re: guess where 1/2 of your tax money is spent ...

    Hmm

    I don't consider paying into retirement and healthcare programs (which in my area are used mostly by the elderly) a problem nor do I think entitlement is the proper word or description for Medicare.

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    Banned Melonie's Avatar
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    Default Re: guess where 1/2 of your tax money is spent ...

    don't consider paying into retirement and healthcare programs (which in my area are used mostly by the elderly) a problem nor do I think entitlement is the proper word or description for Medicare
    Taryn, consider what the institution of a means test for Social Security and Medicare would mean. For 20 years you pay 14.5% of your taxable income towards social security and medicare taxes (a.k.a. self-employment tax). For the same 20 years you scrimp and save and set aside another 14.5% of your income towards an IRA or 401k. If a means test is put in place by the time you retire, BECAUSE you have money available in an IRA or 401k account you may find yourself ineligible to receive Social Security and Medicare benefits. If a means test is put in place by the time you retire, the only way you will become eligible to receive Social Security and Medicare benefit checks is after you have spent all of the money you have saved in your IRA or 401k account. At the same time, a different person who did not bother to set aside 14.5% of their income into an IRA or 401k, and instead spent that 14.5% of their money on a fancy house or fancy car or expensive vacations or stupid stuff, WILL be eligible to receive Social Security and Medicare benefits (assuming asset transfer has taken place to their children by the time they reach retirement age).

    As far as the term 'entitlement' goes, IMHO this refers to any program/benefit which the recipient did not pay for. Clearly, current Social Security and Medicare beneficiaries are receiving vastly more money's worth of benefits than was ever collected from them in the form of Social Security and Medicare taxes while they were working. It won't be until about 10 years from now, when the first wave of baby boomers starts retiring, that the amount of money actually collected in SSI and medicare taxes from each baby boomer over the course of their career begins to approach the amount of money paid out to them in the form of benefit checks. For the past 50 years, and for the next 10 years, Social Security and Medicare beneficiaries receive(d) far more cash value of benefits than they ever paid into the system. By definition receiving benefits which you did not pay for, but which are being paid for via someone else's tax money, constitutes an entitlement program - which has been the case for the past 50 years and will be the case for the next 10 years.

    Once you go beyond the 10 year mark in the future, it will not be economically possible to pay out Social Security and Medicare benefits which are equal to the total amount of tax money collected over the working career of the beneficiary (since SSI and medicare tax rates and income ceilings have only recently been increased). This is because a large portion of that tax money was used to 'cover the shortfall' between the amount of taxes older beneficiaries actually paid into the system and the amount of their benefit checks paid over a period of many years ! Therefore 10 years from now, Social Security and Medicare will stop being entitlement programs. At that point in time, it will either be necessary to massively increase Social Security and Medicare taxes on younger people to levels well above the current 14.5% level (or 7.2% for employee + 7.2% for employer), or it will be necessary to cut Social Security and Medicare benefits for all retirees, or it will be necessary to cut Social Security and Medicare benefits to the '''rich''' while continuing to pay Social Security and Medicare benefits to the '''poor''' - i.e. a means test. Of course the gov't's definition of '''rich''' will probably boil down to anyone with more than $10,000 worth of retirement assets in a 401k or IRA account.
    Last edited by Melonie; 12-28-2005 at 01:58 PM.

  7. #7
    Sitri
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    Default Re: guess where 1/2 of your tax money is spent ...

    I guess I don't see a problem here. Social Security taxes get paid to SS receipients. Would it be better if 90% of our budget went to "offense" oops I mean defense so we could spend more on bombs?

    I dread when the government goes into a cost benefit analysis and concludes that for a $50,000 bomb they can wipe out 50,000 u.s. citizens in Sun City, FL and save $50,000,000 in entitlement benefits.

    just kidding.

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    Featured Member scorpio's Avatar
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    Default Re: guess where 1/2 of your tax money is spent ...

    yeah, and ol George sends the other half to Haliburton (I mean Iraq)

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    Banned Melonie's Avatar
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    Default Re: guess where 1/2 of your tax money is spent ...

    I guess I don't see a problem here. Social Security taxes get paid to SS receipients
    Actually that isn't true. Social Security taxes, for the moment at least, more than equal payments to Social Security recipients. The 'surplus' is 'loaned' to the general budget in the form of special bonds. Congress promptly spends the 'loaned' Social Security tax money on other entitlement programs and pork barrel projects in lieu of raising general income tax rates. Ten years from now, when the baby boomers start retiring en masse and Social Security taxes no longer equal the amount being paid out to Social Security recipients, there will be an attempt to 'cash in' those special bonds. However, in order to do that, the people who are still working 10 years from now are going to have to endure a major income tax increase in order for the general budget to pay the Social Security special bonds off - with that same major income tax increase making it virtually impossible for people who are still working 10 years from now to save any reasonable amount of money in an IRA or 401k. At that point the s#!t will hit the fan re demographics, Social Security benefit promises will be broken in order to prevent a 'tax revolt' by people who are still of working age, and a 'means test' for Social Security and Medicare benefit eligibility will likely be instituted.

    I dread when the government goes into a cost benefit analysis and concludes that for a $50,000 bomb they can wipe out 50,000 u.s. citizens in Sun City, FL and save $50,000,000 in entitlement benefits.
    The gov't won't 'bomb' citizens to death, but if National Health Care is adopted then gov't cost benefit analysis may indeed come into play. For example, if a 45 year old and a 65 year old both need a $100,000 heart surgery, the gov't is very likely to quickly approve the 45 year old (and get him back to work to collect 20 more years worth of taxes) and 'stall' the 65 year old until he dies of a heart attack (and stops collecting Social Security and Medicare benefits). This is pretty much standard procedure in Canada these days I'm told.

    As for sun city Florida, local government will probably try to use eminent domain proceedings to evict low income people collecting entitlement checks in favor of an upscale real estate developer, and then try to find some means of relocating those low income people to a different county (or better yet different state) so that somebody else's tax money will be used to pay for their entitlement benefits !

    As to the Iraq war expense, Halliburton gov't contracts etc., again regardless of how one personally feels about these matters, in the grand scheme of things these expenditures are a relatively small percentage of the total budget, as compared to entitlement programs comprising nearly 50% of the budget. Put another way, the $80 billion spent in Iraq is only equal to one quarter of the federal tax money kicked back to the state of California alone.

    ~
    Last edited by Melonie; 12-28-2005 at 05:45 PM.

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    God/dess montythegeek's Avatar
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    Default Re: guess where 1/2 of your tax money is spent ...

    Please note that Melonie's comments are entirely off the cuff and not based on any proposal by anyone. There is no proposal to means test Social security or medicare, not will there be for a simple reason--whoever voted for it would be run out of office on a rail and defeated 90-10 in the next election. The comment that an IRA with $10 K would disqualify you from getting social security, or tax it at 100% is irresponsible and reckless, even if made in hyperbole and jest. Even a person who contibutes $5/week to an IRA would vastly exceed that amount over 40 years. Compounding that and having a company match would easily raise it too--$5/week matched for 40 years earning 5% would generate $63K--all extraordinarily conservative assumptions. Since all defined contribution pensions get rolled over to 401k's when a person changes jobs, 70+% of workers would exceed 5-10 times that amount with ease.

    It borders on a recomendation of profligacy, or be punished, an unsuitable recomendation.

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    Banned Melonie's Avatar
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    Default Re: guess where 1/2 of your tax money is spent ...

    I have stated many times that an employer matched 401k basically constitutes 'free money' and should be taken advantage of to the maximum degree possible. I also stated that I am 'leery' of placing huge amounts of money into 401k and IRA accounts - I did not state that no money whatsoever should be placed in 401k and IRA accounts. I particularly did NOT state that one shouldn't save for retirement in any form !

    The purpose of this thread was to simply point out that nearly 50% of the US federal budget already consists of Social Security, Medicare and Medicaid payments, and that the demographics already in place clearly point to either a decrease in these benefits or steep tax increases for people who are still working 10+ years from now. True that a 'means test' for benefit eligibility is politically unpalatable at this particular moment, but 10 years from now the political and economic situation may be very different than it is today. Entering into a 401k or IRA account basically constitutes making a bet that the tax and benefit rules in effect today will remain in effect for the next 10-20-30 years - which IMHO is a low percentage wager. However, entering into a Roth, or making other investments which do not involve huge penalties if the money is touched prior to reaching retirement age, IMHO present a more flexible means of dealing with any future changes in tax and benefit rules.

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