5 American Economic Statistics That Will Blow Your Mind

Like Douglas Adams' description of space, the economic issues in this country have become quite big. In fact, most people are, in a very real way, unable to comprehend how "vastly, hugely, mind-bogglingly big" our problems have become. It's all "trillions" this, default that, Apoco-bankruptcy-Armagedde-debt-alipse. That's why so many people look at you like a cat peering at a calculus book when you try to explain the scope of issues we're facing.

Unfortunately, once people get to that point, their brains usually turn off and they tend to conclude things aren't really so bad because they don’t see members of Congress running around in circles, wetting themselves in terror on television. This is a mistake because most members of Congress are wealthy, influential, and assume that even if the rest of us are sleeping in cardboard boxes and eating cat food, they'll be dining on steak in some plush, gated villa. Sadly, they’re probably right about that.

With all that in mind, since there's unlikely to be a "Members Of Congress And The President Have To Live Like The Rest Of Us If We Go Bankrupt" bill that's passed in the near future, it seems prudent to offer up some statistics that may, if you're open to it, cause you to look at America's economic situation in a new way -- sort of like a goose that realizes it's about to be chopped open by a greedy farmer for its golden egg and flies off to find a nice swallow in Capistrano instead.

1) "How do you ‘invest in the future’? By borrowing $188 million every hour. That’s what the government of the United States is doing. It’s spending one-fifth of a billion dollars it doesn’t have every hour of every day of every week — all for your future!" -- Mark Steyn

One hesitates to start off with a statistic that hints at the almost infinite amount of money we're spending right now because it's nearly too big to comprehend. That being said, we do need to give people a sense of how far beyond our means we're living right now.

Remember the Judgment Day style theatrics that surrounded the threat of a government shutdown back in April? That sliced $350 million from this year's budget. That's about as much as we borrow in two hours. Now, they're at it again in Congress, but this time they're talking about cutting $2 billion from this year's budget. We'll cover that in 11 hours time. Not that the "future budget cuts" aren't appreciated, if they ever come, but the extraordinary amounts we're borrowing and the miniscule amounts we're able to cut in the here and now don't suggest we're even remotely serious about dealing with this issue yet.

2) "The typical husband and wife who reach age 66 and qualify for Social Security -- Starting next year, this typical couple, receiving the average benefit, will begin collecting a combination of cash and health-care entitlement benefits that will total $1 million over their remaining expected lifetime.

According to my calculations based on government data, such married couples will begin receiving monthly Social Security checks that will, on average, total about $550,000 after inflation. They will receive health-care services paid for by Medicare that, on average, will total another $450,000 after inflation. The benefactors will be a generation of younger workers who are trying to support themselves and their families while paying taxes to finance the rest of government spending.

...Medicare premiums paid by senior citizens once covered half of the cost of physician and related services. They now cover one-fourth. Copayments once covered nearly 40% of these services’ costs. They now cover only 20%." -- Joe Cogan

The reason we have such out-of-control spending and such difficulty dealing with it is because of what Al Gore would probably call an "Inconvenient Truth," one that may very well upset many of the people reading this article. The biggest reason we have such a huge deficit is because so many middle-class Americans are, or are about to, receive Social Security/Medicare benefits that cost much more than they've paid into the programs in taxes.

The fix for that problem, which would be about as popular as hiring Casey Anthony as a nanny, is to find a way to dramatically reduce how much we're paying out in Social Security/Medicare benefits or to dramatically increase the amount people are paying for those benefits. Neither option would be popular, but we can be sure that one, the other, or both will eventually happen because that's what's going to have to happen if we'd like to stave off bankruptcy as a nation.

Since that's such an unpleasant idea, many people prefer to offer up a pleasing fantasy instead. "Tax the rich" and all will be well! You are about to see why that is not going to be the hair of the dog that bit America after a long, drunken spending bender.

3) "In fact, in 2006, the Census Bureau found only 2.2 million households earning more than $250,000. And most of those are closer to the Lubbock city manager than to Carlos Slim, income-wise. To jump from the 50th to the 51st percentile isn’t that tough; jumping from the 96th to the 97th takes a lot of schmundo. It’s lonely at the top.

But say we wanted to balance the budget by jacking up taxes on Club 250K. That’s a problem: The 2012 deficit is forecast to hit $1.1 trillion under Obama’s budget. (Thanks, Mr. President!) Spread that deficit over all the households in Club 250K and you have to jack up their taxes by an average of $500,000 -- which you simply can’t do, since a lot of them don’t have $500,000 in income to seize. Most of them are making $250,000 to $450,000 and paying about half in taxes already. You can squeeze that goose all day, but that’s not going to make it push out a golden egg.

....Every time you raise the threshold for eating the rich, you get a much, much smaller serving of meat on the plate — but the deficit stays the same. The long division gets pretty ugly. You end up chasing a revenue will-o’-the-wisp." -- Kevin Williamson

Can we get more revenue out of the rich? It seems likely that we can, but that's not to say it would be easy. Rich people have lots of options. They can put their money in tax shelters, they can move overseas, they can pay lobbyists to get loopholes, they can decide they have enough money and stop working, etc., etc. Still, even if those existing options magically disappeared somehow, we still couldn't fix our spending problems by taxing the rich because they simply don't have enough money. Even if we were the old Soviet Union and Vladimir Lenin were our President, we couldn't fix our problems by confiscating everything the rich own.

This is one of the reasons why the American people are always being warned that "taxing the rich" isn't the solution to our problems because the biggest revenue source is the middle class, not the rich. Once the Left has finished picking the bones of the rich, it will move on from the appetizer to the main course, which is the middle class. That being said, even if the Republicans were to join the Democrats in their lust for higher taxes, as you’re about to see, it probably wouldn't fix our problem.

4) "Over the decades, tax rates have varied quite a bit. They’ve even gone up as high as 90% in some brackets. Yet, the actual amount of revenue coming in doesn’t change very much in relation to GDP.

...The key thing to take away from this is that the amount of revenue the government can bring in via the income tax is, for whatever reason, more inelastic than most people think. That’s yet another reason to put more emphasis on balancing the budget via spending cuts as opposed to trying to fix the problem with tax increases.

Now, if Hauser’s law is as spot-on as it has been in the past and it’s going to be difficult to raise the government’s revenue level much beyond the 20% of GDP mark..." -- John Hawkins

Welcome to Hauser's Law, a piece of economic theory that could turn out to be quite relevant in the next few decades. Long story short, tax rates go up and down, but the amount of revenue the government brings in has turned out to be fairly static.

The reason this is so relevant is that the Democrats, although they loathe to publicly admit it, want America to look much more like Western Europe: They want much bigger government and they want the populace paying a significantly higher tax rate to pay for it. They've been quite successful at getting the bigger government part implemented, but Republicans have managed to block the higher taxes. Hauser's Law suggests that even if Democrats got their hearts’ desire and dramatically raised taxes, it wouldn't generate the revenues liberals expect. In other words, big government may be even more financially unfeasible in this country over the long term than it is in places like Greece or Spain -- which would hardly be a shocker given that our Founding Fathers were highly individualistic, tax-hating, small government fanatics who clung to their guns and religion.

5) "In FY2010, we spent $164 billion just on interest payments on the debt — up 18 percent from the year before. And that’s at historically low interest rates. If rates should go back up to their 1970s or 1980s levels, we could easily end up spending more on debt service than we spend today on big-ticket items like Medicare or national defense." -- Kevin Williamson

All too often when we're discussing this dilemma, there's a sense that we have all the time in the world to work it out.

Unless we make some astonishing changes in the way our government works, or rather doesn't, one of two things is going to happen -- and probably within a decade or two.

We may continue to go further down the current path the Fed is on, by printing truly humongous amounts of our currency, and it's going to cause rampant inflation that will eviscerate the value of the dollar. In other words, prices for everything would skyrocket and you'd wonder why you'd feel so poor, despite making the same amount of money. We're actually already starting to see this effect with food and gas, although it's fairly insignificant compared to what will likely happen in the next few years.

The other possibility is that we'll lose our AAA credit rating, which realistically could happen in the next two years even if we get a debt ceiling deal. If that were to happen, then it would cost much more for us to borrow the colossal sums the government uses to pay its bills. What happens when the government can't afford to send out Social Security checks and pay the interest on our debt? Well, if you've ever seen Mad Max Beyond Thunderdome and thought, "Wow, I'd love to live in that world," you'll have some good news when that day comes.

Medicare premiums paid by senior citizens once covered half of the cost of physician and related services. They now cover one-fourth.

Sounds about right but if you look at your medicare statement you will see that the government usually only pays about 20% of the billed amount. My wife took a horrible fall last November and is now just completely healed. The medical bills amounted to $54,000. Medicare paid $7300 and Tricare paid $2000.

1) "How do you ‘invest in the future’? By borrowing $188 million every hour. That’s what the government of the United States is doing. It’s spending one-fifth of a billion dollars it doesn’t have every hour of every day of every week — all for your future!" -- Mark Steyn

4) "Over the decades, tax rates have varied quite a bit. They’ve even gone up as high as 90% in some brackets. Yet, the actual amount of revenue coming in doesn’t change very much in relation to GDP.

5) "In FY2010, we spent $164 billion just on interest payments on the debt — up 18 percent from the year before. And that’s at historically low interest rates. If rates should go back up to their 1970s or 1980s levels, we could easily end up spending more on debt service than we spend today on big-ticket items like Medicare or national defense." -- Kevin Williamson

There's a third fix but the author is too blind or too stupid to see it, much less articulate it.

The fallacy of how much one puts in vs how much they take out, ignores a important factor; return on investment. I know, I know government taxes do not provide a return on investment, but if it did Social Security would work.

I am one who happened to log my tax records for my entire working career. The amount I put into SS, would now be worth $1.5 million, and provide a income of $60,000 per year if that money were invested almost anywhere but in the pit of America, the Social Security trust fund.

I dont see that much of this is the pols fault. Anyone w/ a functioning brain understands that lawyers, bankers and pols are worthless bottom feeding trash. Yet we bought their vaporware w/ great delight. They promised riches w/o end in our later years, when we were out of work, when we were too lazy to work etc etc. We jumped at the opportunity to steal from our neighbor to enrich ourselves b/c we wanted to believe their lies. We know though that they were lies. Now the rotten facade has come down around our ears and we whine about the bad pols in DC. Hey, we enabled them and bear the biggest part of the blame.

The amount I put into SS, would now be worth $1.5 million, and provide a income of $60,000 per year if that money were invested almost anywhere but in the pit of America, the Social Security trust fund.

I used to teach an engineering finance course at a public university. That was one of my favorite time-value-of-money examples: How much would your SS investment be worth if you put it in a diversified stock portfolio? Nevermind the employer match, the SS system pays about 3% - not really keeping up with inflation. If people only knew...

we could easily end up spending more on debt service than we spend today on big-ticket items like Medicare or national defense.” — Kevin Williamson
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The topic of discussion is the federal budget. I know that. But....When it comes to overall tax burden on all citizens we must not forget education. Education spending ( federal, state, and local combined) is an **enormous** drag on our economy!

More is spent on government K-12 education ( federal, state, and local) that is spent on our military! If you add in subsidies to state colleges and universities, plus scholarship and loan aid to students the cost is astronomical!

There are the obvious drags on the economy such as people have less to spend after they pay for their property taxes. It costs more to provide shelter for one’s self and family. Rents are higher for those who can not afford homes, but then there are the less obvious drags.

For instance, school taxes increase the final price of absolutely **every** good and service produced in this nation! Increased prices make our products less competitive abroad and they add to the reasons businesses move to other nations.

“The biggest reason we have such a huge deficit is because so many middle-class Americans are, or are about to, receive Social Security/Medicare benefits that cost much more than they've paid into the programs in taxes.”

Last year Pakistan received about $18 Billion of U.S. borrowed money (we'll pay the interest, guys, you just enjoy the money). The Palestinian Authority got a nice piece of change too ($400 million this year, interest free to them not to us).

Perhaps Master Hawkins knows how much they paid into the U.S. tax system.

Then again, there is this on going unpleasantness in the Middle East that is costing multible billions each month(also borrowed money but isn't it all?).

But at least the U.S. will get a price break on the oil from these grateful countries to offset the rebuilding and military costs....... right, Mr. Cogan?

And the bank bail out, and all the useless programs that go for naught...none of these borrowed money eating monsters have anything to do with the deficit, right? Mr. Hawkins.

But grandma and gramps is really the problem so no cola to you for two years!

"The medical bills amounted to $54,000. Medicare paid $7300 and Tricare paid $2000."

Yeah, but how much did you pay. You didn't pay the difference. The problem is that insurance companies and health networks negotiate 70% off standard price contracts. So everyone bumps their price by 3x to 4x the real price they want.

Medicare pays a flat fee per procedure which may or may not be a fair rate. But if you want to do business with Medicare you take it. Doesn't matter what you claim your price is, the real price is what Medicare will pay.

I think they should enforce the old antitrust laws that said you can't charge one group different than you charge another group unless there is a clear cost difference. That would clear a lot of confusion in the field and help the uninsured receive a reasonable rate.

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