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2019-09-18 11:59 by Karl Denninger
in Federal Government , 294 references
[Comments enabled]  

Folks, the claim being run about a "dollar shortage" leading to the repo market spasms is a bald-faced lie and anyone running that crap is committing a fraud upon the public -- the purpose of which should be exposed and then they should be indicted, prosecuted, jailed until dead and then their remains used for fishfood.

Why?  Because at its root it is quite obvious that someone -- or some group of someones -- is running an extortion scheme.

It is a fact that there is well north of a trillion dollars at the Fed in the form of excess reserves.  These are funds that the banks can choose to pull and use for repos, lending or whatever -- they just choose not to.

To the extent that The Fed has encouraged that and, instead of slamming by name the firms that created that spike the last couple of days and nailing them with regulatory sanction they instead launched two repos is outrageous.

There is no dollar "shortage" when over a trillion worth of excess dollars are being intentionally stuffed into The Fed for the purpose of earning interest from The Fed on same (at 2.1%) when The Fed could have simply whacked that rate to zero to make that game instantly uneconomic.

Don't believe the flat out bullcrap coming from certain corners of the Internet and other media -- when there's a trillion dollars laying around on purpose there is no shortage of dollars because "someone" wants a measly $50 or $75 billion on an overnight basis.

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Well look what we have here...

A significant expansion of Social Security currently under consideration by House Democrats would extend the program’s solvency and expand benefits by raising payroll taxes on high-income earners.

If passed, the bill — the Social Security 2100 Act — introduced by Rep. John Larson, D-Conn., would make the program solvent for at least 75 years by beginning to gradually raise payroll taxes in 2020, according to the chief actuary of the Social Security Administration. Under current law, Social Security is expected to expire by 2035.

That's a lie.  It will run out of the ability to pay 100% of benefits from tax receipts and its stack of already-owned Treasuries, but it will not "expire."  Congress can with a single sentence bill stop that by allowing it to run a cash deficit (that is, for said deficit to impact the budget deficit directly) and make no other changes.  This sort of "reporting" is part of the big lie the political establishment runs on this topic on a literal daily basis.

Currently, all employees and employers pay a 6.2 percent payroll tax on wages capped out at $132,900 — but Larson’s bill would immediately impose a tax on wages above $400,000. He then goes a step further, proposing eventually raising that tax rate to 7.4 percent by 2043. Right now, an employee earning $50,000 per year would pay $3,100 in a payroll tax. That would climb to $3,125 in 2020 and peak at 3,700 in 2047 under Larson’s proposal.

This bill has zero chance of becoming law.


Because it would immediately and permanently de-couple Social Security and Medicare in the political scamfest screamer world.

As I have repeatedly pointed out Social Security, while it is running a cash deficit, is fixable.  Indeed, isn't it amazing that the fixes in this bill are pretty-much inline with my article on this a few months ago?  The shift in this bill is close enough to my calculations that it's very likely it would be completely and permanently effective in resolving the question of Social Security's solvency.

This leaves Medicare and Medicaid, which cannot be fixed by any means other than destroying the medical monopolists.  All of them. That, in turn means accepting a deep recession or even Depression in this country as it would force the firing of all of those in that industry who never provide a single second of care to a single person; they are the means and method of the extortion forced upon all Americans in the form of differential billing and other similar schemes, all of which should have led to felony criminal indictments a long time ago.

If you fix Social Security then you can no longer wave it around as a political foil by falsely -- and intentionally so -- conflating it with Medicare and using that conflation to scare Granny.  Losing that lie, in other words, is far more important than resolving any of the fiscal issues facing our nation and government.

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2019-02-13 14:50 by Karl Denninger
in Federal Government , 435 references
[Comments enabled]  

There's simply no other way to express this....


These numbers are for only three months, so for the full year multiply by four.

Again, the total "social insurance and retirement" tax grab is $274 billion.  Social Security is a 12.3% tax (up to the cap) and Medicare is 2.9% (no cap.)  The split is thus roughly-speaking ~19% Medicare, the rest (81%) Social Security.

If you want to get down into the detailed numbers they don't "quite" add there because there is both spending and tax revenue that gets bucketed in each from the various line items.  But it's not off by much; the "line item" (without the bucketing) comes up as 74/26 -- not materially different.

81% of $274 billion is $222 billion.  Social Security spent $251 billion.  That's a ~29 billion shortfall.  Not good but there are a lot of Treasuries held against that requirement, and by 2026 the budget impact as a percentage starts to fall because the boomers start to die, statistically speaking.  In other words Social Security had a ~12% shortfall over the first three months, indistinguishable from my last look (12% .vs. 13%.)  This is easily fixable on a forward basis without much economic pain.

Medicare, on the other hand, spent $153 billion but took in just $52 billion.  That's a shortfall of 66%; that is, two thirds of it is unfunded.  You would have to more than triple the Medicare Tax Rate in order to bring it to parity.

That's an "improvement" over the nearly 75% deficit in the first month but we are in fact talking about bleeding out in two minutes rather than three; the outcome does not change.

Add to that "Health" (Medicaid, mostly) and it's much worse; now you take in $52 billion but pay out nearly $300 billion.

Note that the deficit thus far is $319 billion.  If you were to get rid of the deficit between Medicare and Medicaid .vs. tax receipts you would almost close the deficit to zero.  If you also increased the FICA tax rate by 13% (to just under 7% for "each half"), increased the income cap where it stops being collected or some combination that wounds up in the same place as well the deficit would be effectively zero.

$319 billion over three months equals roughly $1,300 billion, or close to $1.3 trillion in deficit for the entire fiscal year.  The only good news is that April is usually a strongly positive month (as a result of taxes being due) but either way the deficit is almost-certain to be in the neighborhood of $1.1 trillion this year.

You cannot fix this with either taxation or cost-shifting. It is mathematically impossible to do so.

For example you'd have to nearly double the individual income tax rate on everyone, including the middle class; to close the gap by increasing the corporate tax rate you would have to raise it by more than an insane and utterly impossible 600%.  Any claim that we can solve this by making people pay "their fair share" is a flat-out lie.

You cannot get there by "cutting spending" on other than these programs either; if you cut all "other spending" to zero along with transportation and education you'd only cover 30% of the deficit.  Cutting military spending to zero (which is obviously impossible) wouldn't get there either.

There is only one way to solve this problem and that is to collapse Medicare and Health spending by 80%.  You can only resolve the problem by collapsing the medical and health insurance monopoliesforcing everyone to publish a price for everything and charge everyone the same price, where said price must be handed out before service is provided, along with telling everyone involved that for any and all conditions in which a lifestyle change will remove the need for treatment government will pay zero unless the person in question makes that change.

The trend is not improving and it is not "The Next Generation" that will have to deal with this.

This has to stop right damn now or it will blow up before we get through the next Presidential term -- and no, you cannot tax your way out of it either.  The people in Washington DC -- Congress and the President -- must be held personally and politically responsible for their refusal to deal with the only way to put a stop to it, which is to destroy the medical monopolists using existing, 100+ year old law, and to do it right damn now.

And if they refuse we the people must enforce our demand for them to do so.  They will refuse, I remind you, unless forced by the people -- and there are peaceful and lawful means to do exactly that (e.g. a general strike.)

Nothing less than the literal existence of this nation as a Constitutional Republic is at stake.

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2019-01-25 07:00 by Karl Denninger
in Federal Government , 140 references
[Comments enabled]  

Yes, we need a wall.  Why?  Because bad people sneak in without one.

They do with one too, but it's harder and thus there are fewer attempts, and even fewer successes.  That's good, not bad.

You have to want more illegal invaders to refuse physical barriers.  Just as locking your car or house does not make it impossible to steal from either, it increases the difficulty and thus makes it less-likely.  $5 billion in the context of the federal budget is just over one tenth of one percent of spending.  Any gain in security is worth that amount of money.

But if you want to stop the insanity generally you have to force Congress to keep the promise it made when Reagan gave amnesty to illegals: You must stop the handouts.

Reagan was promised wide-scale immigration reform to end the enticement to come illegally, on a permanent basis, in return for amnesty for illegals already here.  He gave Congress the amnesty.  He never got the elimination of the enticements and it was the Democrats that didn't give it to him.

This is the same political party refusing now and it does not matter that most of those reps and senators are no longer serving; the party itself is the same.

Trump therefore should demand, before any further negotiation, that the past promise be fulfilled.

It's not that hard to do:

  • 100% E-Verify, under criminal felony penalty for failures to do so and business seizure for a second offense.  No exceptions.  This is trivially enforceable; employers already have to file 941s to report withholding taxes.  Add one field for each employee that must contain the E-Verify control number on each report.  Change the law so that non-reporting or false reporting on a 941 is a felony criminal offense with a statutory penalty of $5,000 per employee, per month not reported or falsified and that all directors, officers and employees involved in producing said false report are subject to a year in prison, consecutively, for each employee not reported.   This instantly ends employment capability for illegal invaders.

  • No welfare or other government program of any kind that is in whole or part funded by the Federal Government (specifically: Medicare, Medicaid, Section 8, Food Stamps, WIC, S-CHIP, Education, etc) may be provided to any household unless all residing there are verified US Citizens or permanent residents.  Require prosecution for lies on said forms verifying eligibility and require that any such lie is a felony.

  • No medical treatment without proof of payment is required of any facility except as pure charity care to any person who is not a lawful permanent resident or citizen.  All such care amounts, if provided without payment, must be publicly disclosed no less often than quarterly in aggregate along with the total amount of actual collected payments for services by all medical facilities (in other words if they're going to try to make you pay for it under the table they have to disclose it.)

  • No remittances may be sent out out of the country without positive identification and proof of lawful residency or citizenship from the person doing the sending.  Period.

  • No birthright citizenship.  Come here and crap out a baby, it's a citizen of whatever nation you are but isn't an American citizen.  You must be a citizen to confer citizenship at birth.  Period.

  • Unlawful entry must be defined as a criminal felony and permanent bar to future entry for any reason.  If you wish to claim asylum, come to the border and lawfully request it.  If you wish to visit, come to the border and lawfully request entry.  If you cheat from this day forward no matter how or why you are permanently barred from ever entering the United States.

  • Those nations which border ours must be held responsible for any person who is on their soil and makes an attempt at unlawful entry, or who is turned away or deferred during an asylum request until their case is heard.  If you are our neighbor and call yourself "friend" and "trading partner" then start acting like one.  If someone illegally enters from your nation you have a responsibility to take them back when we catch them.  If someone comes into your nation with the purpose of requesting asylum in our nation and you allow them to do that's fine, but that person's safety and place to live is on you until their claim is adjudicated.  What you do from there and whether you let the people in to make said claims in the first place is your business.  Any nation that refuses, even once, to take back an illegal invader caught after unlawful entry from their nation, or a person with a deferred or refused asylum request that presents at our shared border has all trade and border crossing closed until it accepts back the person or persons it allowed to attempt to invade our nation from their land.

For those already here who, the claim is, we should "take care of" (e.g. Dreamers, etc)

  • If you came here as a child and are now an adult you must have graduated High School and demonstrate proficiency at a minimum standardized testing level in all applicable subject matter, including the English language, to qualify for further deferment.  While there are some "Dreamers" who are college students or even graduates at this point virtually all covered by this program are now adults.  ROUGHLY HALF have failed to graduate High School, demonstrate functional literacy in English or both.  These are not "Dreamers", they are public charges and must not be given anything beyond the theft they've already accumulated.  That one in ten -- or one in 100 -- is a high-achieving college graduate or student does not in any way extend to those who are either slugs or thugs.

  • If you came here as a child and still are one you must complete your education and become proficient in English. Drop out or get kicked out and you both lose your eligibility and are immediately deported.

  • You must have an executed Affidavit of Responsibility as for any other legal immigrant by an existing citizen who is responsible for you.  In other words you must have a citizen sponsor who both can and will take financial responsibility to prevent you from being a public charge.  This is required of legal immigrants and it damn well needs to be required here too.

  • You must not have a criminal record of any sort more-serious than a routine traffic violation.  Any conviction for an offense against the public peace including robbery, DUI, drug dealing, shoplifting and of course more-serious criminal activity, whether by conviction or plea, is an automatic disqualifying event, without exception.

  • You must document that you have either received all of your support from your sponsor or have lawfully worked and paid taxes in full.  This includes educational, medical and other government-funded expenses; if you received public education you or your sponsor must repay the fully-laden per-pupil cost of same.  If you received medical care under Medicaid or similar you must reimburse the full amount spent on your care by the government.  If you worked under the table you must demonstrate that you personally paid all the taxes otherwise due including both halves of FICA.  If you haven't done so up until now as a result of intentional conduct (e.g. working for cash under the table) you may be excused from criminal liability for your intentional conduct but you must report and pay all such tax arrears anyway, including interest and penalties as with any other intentional underpayment and you must begin to do so immediately and on an agreed payment plan without exception, or your sponsor must do so, until it is all paid off.

  • Assuming the above is met you may have a provisional green card however you still go to the back of the line and are subject to all of the above until your turn comes up in our normal, legal immigration proceeding.  Once your turn does come up you may have full permanent residency and ultimately apply for naturalization as may any other lawful permanent resident.

That's the minimum opening requirement.

If we do not shut off the welfare state for illegal invaders we will never solve the problem.

Leave the government shut down until this is passed first.

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2019-01-02 06:00 by Karl Denninger
in Federal Government , 2558 references
[Comments enabled]  

I said NOW damnit.


12.4% tax for FICA, 2.9% for Medicare.

Total is 15.3%.  Of that 81% is FICA, 19% is Medicare.

The total in "Social Insurance and Retirement" taxes taken in (that is, the entirety) in the first two months of the fiscal year was $179 billion.  Of that $145 billion was Social Security tax and just $34 billion was Medicare tax.

Social Security paid out $167 billion.  That is more than $145 billion but there are bonds that are being cashed -- quite a lot of them in fact -- and the structural deficit for that program is $22 billion or 13% (that is, 87% of the payouts are offset by pay-ins.)  If you got rid of the disability scamming you'd close the gap materially; SSDI has paid out almost $24 billion in the last two months.

The point on Social Security is simply this and anyone saying otherwise is a damned liar:  A 13% structural deficit is fixable without a crazy amount of pain (either by lifting the salary cap, a 13% increase in the tax rate (to 14% total; 7 and 7) or some combination of the two, and that assumes no effort on reduction in disability scamming.)  Further, the load on the Social Security system from the boomers will start to fade as they begin to pass within the next 10 years.



While I suspect some of this increase was a result of game-playing with Treasury not paying people right near September 30th in an attempt to "cook the MTS" for the end of fiscal 2018 and thus "announce" a smaller deficit it is extremely unlikely that all of it can be attributed to that sort of gamesmanship.

There is no "entitlement crisis" in Social Security.  It is all in the medical side and it is going to bankrupt the nation and government both at the state and FEDERAL level unless it is stopped right here and now.

These are not my numbers or projections; they are the actual cash flow from the Treasury department.  They do not reflect what someone thinks will happen they reflect what actually has happened and is happening -- right here, right now.

The MTS is truth just as your bank statement is truth because the MTS, as a cash flow statement essentially is the Federal Government's check register!

You can tamper with asset values and you can make all sorts of projections and claims but if you have ever run, examined or done accounting for a business you know that cash flow is always truth.

Any media publication, "pundit" or politician who tries to spin this and claim that Social Security is a "difficult" part of it or that in some way they're connected must be pilloried and run out of town on a rail.  They are lying and intending to bankrupt you and this nation.  They are not only violating their oath of office they are deliberately destroying both you and the country as a whole.

If the government will not enforce the law (specifically, 15 USC Chapter 1), break all the medical monopolies and slay these jackasses with criminal prosecution immediately, driving medical costs down by 80% so the cash flow statement returns to something resembling balance then the only peaceful option remaining for the public is a full-on General Strike to compel the government to do so -- right here, right now, today and forevermore until the government takes that action.

The truth of the nation from a fiscal perspective is simply this: If the medical monopolist crap is not broken now fiscal collapse at local, state and federal levels is a certainty.  There is absolutely no possible way out of this box through higher taxes, cost-shifting, economic "growth", more borrowing or even all of them at once.  "Hide the sausage" games just flat-out don't work.

Time's up.

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