Can We Talk About the 3rd Rail, Folks?

It's Time To Talk About It

(photo credit)

Article contributed by “The Ed”

God bless them!  The Heritage Foundation keeps track of federal spending and presents different aspects of the federal budget in charts that are clear and easy to understand.  Easy is a relative term.  The federal budget is enormous, complex and layered by laws that have been passed over decades.   Knowing just how hard it is to make sense of the federal budget, I commend the Heritage Foundation for their clarity.  I refer to the different charts presented by the Heritage Foundation in this article to make the different points that need to be made for this discussion.

The federal budget is a mess.  We have been saying that for decades.  But really, how bad is it?  Let’s take a look at what a family making the median family income in 2010 would look like if that family had a similar financial outlook to what the federal government has.  The median family income in 2010 was $51,360.  The family would be spending $73,319.  That family would be carrying $325,781 in debt most of which is short term and they would have nothing to show for it.  Think about it.  Would you lend that family any money?  Would you be one of the investors who hold their credit cards and mortgage?  Would you lend them more money?  If you were the family’s employers would you increase their wages so that they could make ends meet?  Such an increase would only solve the problem temporarily since this family’s spending has only increased year after year.  The federal government survives because the interest rates are at all-time lows.  How many remember the years when Paul Volcker was the Fed Chairman?  The interest rates rose above 15%.  That much interest would wipe out the federal government’s income.

You don’t solve money problems with money.”  This is a quote from Dr. Phil and no matter what you think of him or his show, he got that one right.  Unlike the aforementioned median family the federal government has the right to raise its income with more and higher taxes.  But does it work?  The top tax rate has varied from 28% in 1988 to 91% in 1960.  And yet the tax revenue has only varied from 7.1% to 9.2% of GDP.  And that trend did not follow the tax rates.  Raising income tax rates on the wealthy, while popular in some circles, will not solve the fiscal crisis that the federal government faces.  The federal government could always raise taxes on corporations.  But since Japan has lowered its corporate tax rate, the US has the dubious distinction of being the country with the highest corporate tax rate.  Since 1970 federal spending has risen 287.5% in inflation adjusted dollars.  Raising taxes to give to the federal government only seems to give Congress license to spend more.

If raising taxes won’t solve the debt problem then we have to look at the spending side of the problem.  With revenues of $2.3 trillion, the 3.6 trillion being spent each year has to shrink by $1.3 trillion to bring it in balance.  The entitlements alone are $180 billion more than the tax receipts.  That means that if all of the tax receipts went to the entitlements, the business of government would be financed entirely with debt.  More importantly, it means that the fiscal crisis facing our U.S. Congress cannot be resolved without addressing entitlements including Social Security, Medicare, Medicaid and other mandatory programs.

Now I have blown it.  The cat is out of the bag.  Everyone reading this can tell that I am going to say that Congress’s fiscal crisis cannot be resolved without affecting seniors – the ones most likely to vote.  That is true.  Congress’s fiscal crisis cannot be resolved without affecting seniors and soon to be seniors like me.  Now I have touched the third rail of politics.  Somebody had to… and I am not running for office.

This Kinda Talk Makes Me Angry

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Congress’s fiscal crisis will not be resolved without clamping down on the third rail of politics

Back when Social Security first was enacted, the average citizen lived to be 60.  Social Security kicked in at 65.  Social Security was easy to keep funded.  Now things have changed.  The US Census Bureau expects the average life expectancy to be 78.9 years in 2015.  Now Social Security is not so easy to keep funded and it is getting harder.  We can say the same for Medicare and other federal retirement benefits.

Now suppose another change happens.  Through the miracles of modern medicine, diabetes, cancer, heart disease, stroke and all forms of dementia are eradicated.  Now people can expect to live to be 100 years old.  Should they still retire at 65 and be supported by the generations that follow while those generations try to raise their families?  This has not happened and it may never happen but it does clarify a point.  If you live longer, you should work longer.  The Social Security/Medicare/Retirement age should rise with the life expectancy.  So far it has not.

This does not say that we should balance the budget on the backs of seniors.  It only says that we cannot balance the budget without affecting them.  It is only proper that everyone gets affected by the budget ax.  But that is the subject of another article.

Talking Common Sense - Painful

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About Necessary and Proper

Jeff believes in the Individual's ability to excel when liberty and freedom of choice are protected. Also believes in the Community's ability to take care of the vast majority of its own issues and needs when the federal government leaves the Community's resources and sphere of control alone. State and local choice produce better results than centralized federal control.
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3 Responses to Can We Talk About the 3rd Rail, Folks?

  1. stephnelson says:

    The Ed,
    It is also important to consider that less children are being born, which is something that the designers of Social Security could not have fathomed at a time when family life and children were more valued. Here is a great read about that dilemma:

    I will also add, and I realize it could be a massive rabbit trail from your post, but in my opinion, it all ties in together. There have been 55,892,708 abortions performed since Roe v. Wade passed, significantly decreasing the younger generation who, by the design of crafters of SS, would otherwise be here to support your generation and mine in retirement.

    Not trying to get into an abortion debate. Trust me, I’ve gotten my fix over on our blog this week! 🙂 Just adding that to the mix of your wonderful analysis. And it was refreshing to hear someone your age admit that cuts will need to be made to programs for the elderly. It’s definitely a sacrilegious topic!


    – S


  2. The Ed says:

    I agree that we would do better with a higher young population. But as for the abortion debate, I prefer not to get into it for two reasons. The first is that I see it as a way to distract from the economic argument that affects everybody. The second and more important reason is that I see abortion as a symptom of the disconnect between freedom and responsibility. Solving the disconnect will do more for the pro-life movement than Roe v Wade did for the other side.


    • stephnelson says:

      Totally respect that! 🙂

      And I think you make a very interesting second point. Thanks for more food for thought! Abortion is my personal flag-ship issue, but I have not considered it exactly from that angle, but I will. Thank you again!

      – S


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