Budget Debt
The US Government spends about $3.7T a year and generates revenues of about $2.5T a year. A $1.2T annual deficit in 2012. In the last two years, Sequestration cuts and increased revenues have reduced the deficit. Now that Obamacare is underway, forecasts skyrocket for budget deficits. If anyone wants to know why we have a budget problem in this country, all you have to do is look at the running debt clock. We are now at $17T in debt.! But, if big numbers alone don't get your attention, then lets put the $17T in perspective, it represents over 100% of GDP. The nation owed $10.6 trillion on Jan. 20, 2009, when President Obama was sworn in, and he has added another $5.4 trillion since – more than Bush piled up in two terms. There is bipartisan agreement that we cannot sustain this level of debt. There is also bipartisan agreement that we must correct the outflows exceeding inflows that drives the debt higher every second (see debt clock) . Everyone who manages a checkbook has seen this problem before and knows how to correct it - reduce expenses and increase income. Increasing revenues is critical to the solution, but will not have an immediate impact. Reducing expenses is also critical to the solution and can generate immediate impact. It is the only thing in your control instantly! Everything else we here about this subject beyond these two facts is just noise and should be ignored. The political left and right cannot agree on how to correct this problem. Doing something is also better than doing nothing, which is what this stalemate is giving us now. The left solution to our problem is to increase taxes on the rich to increase income. Currently the top 20% of income earners pays 80% of the federal tax burden. So do we want them to pay 100%? 110%? 120%? Maybe just write the check every year for the entire cost of government, whatever it is? Clearly this is not the solution. The right wants us to reduce spending and taxes, which is also a poor solution in a recessionary economy. But the truth is we must do both (reduce expenses and increase income), we must do it now and it will not be easy. All the political hot air outside these two facts is simply a distraction from the difficult but obvious answer. Europe is going through this right now and they are struggling mightily with the anticipated pain of the solution that in their hearts they know is necessary. To increase income we must immediately restructure the tax code to foster a growing economy. A growing economy will increase income (tax revenues for the government) over the next 10 years, but not immediately, this is a delayed impact. To immediately begin to impact our budget and debt problem whiling anticipating increased revenues we also must immediately and dramatically cut spending. That MUST include discretionary spending AND entitlements which represent 90% of the problem. The left will say you are hurting education, the homeless, healthcare of all Americans, the elderly and on and on. The right will shout "we are already taxed enough". All This whining MUST be ignored. No one wants to hurt themselves, their families or their neighbors We have no choice but to intelligently make these difficult decisions while minimizing the pain. But there will be pain. And our representatives MUST ACT NOW. It is a dereliction of duty if they do not. Below you can watch the ongoing debate on this critical issue. And hopefully see the solution we need develop.

Main Components of the Spending Bill.

from The Gray Area:

Ryan and Reid like it. Pelosi doesn't, but is happy they got a lot of what they wanted. Obama will sign it. Does that mean it is a good bill? No one got everything they wanted, but everybody got something they wanted. Probably a good bill then.

More From ZeroHedge:

For those wondering what are the main components of the spending bill, here is a quick summary. From Goldman Sachs. KEY POINTS: 1. A broad year-end spending and tax deal has been reached. Congressional negotiators finalized their year-end agreement on spending for FY2016 and a long-term extension of tax provisions early this morning. The bill -- particularly the tax components -- includes several changes of interest to the market, as described in more detail below. Details of those changes can be found here and here. We provided background on many of these issues in a US Daily last week. 2. We expect this legislation to become law. While each party opposes certain aspects of the deal, overall we expect there to be sufficient support to get majorities in both chambers. Although the White House has stated opposition to certain changes in the bill, such as the repeal of the oil export ban, they appear to have been careful not to have threatened a veto, and we do not view a presidential veto as a major risk to enactment at this point. 3. The bill would provide a small fiscal boost in 2016. As the bill is over 2000 pages long and formal budget estimates of the spending totals and tax provisions have not yet been released, we will wait to assess the fiscal impact. However, in general we expect the legislation to provide a boost to spending in 2016 that is in line with the increase in the spending caps enacted last month. On the tax side, we expect the legislation to be slightly stimulative in 2016, but will wait until formal estimates are released before making a more detailed assessment. 4. The repeal of oil export ban and extension of renewable incentives made it into the final version. The ban on US crude oil exports would be repealed, and the administration would be prohibited from restricting exports except in national emergencies and similar circumstances. Also, as part of the agreement on oil exports, the production tax credit (PTC) for wind power installations would be extended through 2019, with a phase-down from 2017 through 2019. The investment tax credit (ITC) for solar installations would be extended for three years, through 2019, at the current rate and would then be phased down through 2021, expiring in 2023 (note that the deadline has also been changed, so that it now applies to projects where construction has started by the expiration date, rather than being put into service by expiration). This represents a significant win for the renewable sector, as discussed in our recent report. Refiners, which are negatively affected by the oil export ban, would get limited consolation from a tax benefit for independent refiners. The bill would also extend the existing biodiesel credit for two years, through 2016, but it does not appear to shift it to a “producer” credit as the Senate had proposed. 5. Delay in ACA-related taxes slightly more generous than expected. Implementation of the “Cadillac tax” (40% excise tax on high-cost employer-sponsored health premiums) would be delayed from 2018 to 2020. The tax would also be made deductible as a business expense, easing the burden on employers who might eventually pay the tax. However, in light of widespread opposition to this tax (its delay had just as much Democratic support as Republican) we would expect further changes in years ahead. The existing 2.3% tax on medical device sales would be suspended for two years, so that it would not apply to sales in 2016 and 2017. The existing tax on health insurance premiums would be suspended for one year, in 2017. To generate a small amount of budget savings, the bill would limit the Medicaid payment for durable medical equipment to the Medicare rate starting 2019 and would make changes to payments for imaging. To provide relief for Puerto Rico, hospitals there would receive payments at 100% of the US rate, rather than a blend of 75% US and 25% PR. As expected, the bill also extends last year's requirement that CMS implement the "risk corridor" for plans in ACA exchanges on a budget-neutral basis, which will limit CMS's ability to make the full payments. 6. Real estate provisions largely as expected, but with relief for pending transactions. The restrictions on REIT conversions proposed last week by Ways and Means Chairman Brady were largely maintained in the final version. However, REIT transactions that were pending as of December 7, 2015 are allowed to proceed, provided there was already a formal ruling request with the IRS by that date. The final bill includes the relaxation of restrictions on foreign investment in US real estate under FIRPTA, which would allow foreign pension funds to more freely invest in US real estate assets, including but not limited to REITs. 7. Permanent R&D credit and small business expensing, bonus depreciation extended four years. The bill would permanently extend the R&D tax credit and “Section 179” expensing for small businesses, with thresholds in the latter indexed to inflation starting in 2016. 50% bonus depreciation would be extended four years, through 2019. 8. Stimulus-related personal tax incentives were made permanent. Enhanced refundable tax credits for low-income earners originally enacted in the 2009 stimulus legislation have been scheduled to expire in 2017, reverting back to less generous levels. The bill would make the enhanced versions of the child tax credit (CTC), earned income tax credit (EITC), and American opportunity tax credit (AOTC) permanent. 9. Miscellaneous items of potential interest. Income from gains on timber sales for C corporations (i.e., not REITs) would be taxed at 23.8% in 2016. Heating and air-conditioning would become eligible for small business expensing (Section 179), increasing the tax incentive to install new systems.

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