I give you the US GDP to US Debt chart. In all it’s glory.

USA GDP to Debt

Prime Rate - You Get Much Lower

A lot of retirement planning are based on a 7% rate of return.   Especially pension plans that are not subject to change.  With the Federal Government keeping interest rates artificially low these pension plans are having a hard time delivering.

Additionally the amount of money that people not on pensions have to save prior to retiring is going way up as they count on dividends in the 1% range and not the 7% range, causing many to delay retirement or just put it off.

Consider this, the Government debt service is $169 Billion this year.  That is interest only, and that is at artifically low rates, rates the Government is keeping low as a means to stimulate the economy.  A side effect is if the interest doubles or triples or more, which eventually it will, the Government will be looking at upwards of $600 Billion in interest payments.  Or over 1/2 Trillion dollars a year, and that is just the interest payment, never mind principle payment.

The Government has every incentive to keep interest rates low, which hurts pension plans and retirees, which causes them to delay retirement or not to retire, which exacerbates the unemployment problem.

The Federal Government has a big footprint in the economy and right now it hurts.  Government debt and the Government’s attempts to deal with it and the recession are having horrible effects and it’s going to get worse.

This will cause people to take more risk at a time they should be dialing it back.

Student loan debt, now at $830 billion, has surpassed credit card debt—a statement not likely to have been heard 20 years ago. Student loans, unlike any other form of debt, CANNOT be forgiven via bankruptcy—these loans MUST be repaid. Is this the next bubble to burst?

Personally I think we will see our young fleeing the country to escape their debt.  Scroll half down and see who benefits from this debt, not only are we burdening our young with the Federal and State debts, we are backdoor using them as a source of income.  We sell them the dream, you’ve heard it over and over again on TV and radio, “people with degrees make…….. more than those who don’t”, and by the way we will help finance your dream.   But do they really?  Who is commissioning those studies and who is performing those studies?  Perhaps those who benefit from increasing student enrollment?  Perhaps.

The young don’t understand the soul crushing burden of debt, what’s a 100,000$ to a 18 year old?  What is truely scary is how many loans are made to 2 year college students that don’t finish, you got the debt and no degree.

And for many with degrees an economy in recession with few new jobs.

Why are you not supprised?

Counting Ballots

The number of minivans in the school parking lot was a giveaway.  The budget passed 181 Yea, to 50 Nay (or something close to that).

No drama, no questions.  Just the check in and voting.

This was the third budget vote and essentially the same budget tax increase and spending wise.  The bottom line was the same for all three votes.

The 1st and 2nd differed by a line item providing legal fee relief to residents in the Sewer District.  And I’ll not explain that, it would take a book to fully explain the ins and outs.  The 2nd and 3rd budget “essentially” in Bill Black’s words, were the same.

A exit survey was prepared in the event the budget failed.

Your July 1st tax bill will show a 2.35% tax increase over last year.

$80 Billion in 8 Days.

Treasury’s release this afternoon of its Monthly Statement of Public Debt provides more insight into how much of those options Treasury has tapped so far. The following chart shows non-marketable securities held by the CSRDF each month since April of last year.

The G-fund was $73.3 billion as of May 31, down $56.0 billion from the end of April. As our next chart shows.

Zerohedge.com

Source: ShadowStats.com

CT Mirror: Nonpartisan legislative analysts say they can vouch for less than 40 percent of the $1.6 billion in labor savings figured into the next biennial budget, and are unable to assess the rest–more than $1 billion–because of unanswered questions or insufficient data, according to a memo submitted late Monday to the General Assembly.

“Please note that at this time we are unable to determine or verify the levels that are contained in these estimates in many cases,” OFA Director Alan Calandro wrote in a memo to Cafero.

The memo also showed several unanswered questions tied to more than $665 million in projected savings for the next two years involving health and pension benefits and longevity pay for senior state employees.

No actuarial analysis was offered to defend $67 million to be saved by increasing penalties for senior employees who retire earlier than the normal age.

Analysts could not determine how much state government would contribute to provide a new hybrid retirement plan for higher education employees.

In evaluating health care provisions forecasted to save $245.9 million over two years, OFA asked for the reasoning behind several assumptions.

The proposed budget increased total expenditures by 1.19%, but would have resulted in a tax increase of 2.35% because of reduced tax revenues and reduced state aid.

Residents of the sewer district were large in number at the town meeting and wanted to know if the legal cost burden of the sewer district being sued by several residents and commercial interests would be shared by the town.  Bill Black refused to commit, even though he had identified a possible savings of tens of thousands in reduced health care costs.  These are potential savings and not yet realized.

The sewer district is being sued by several residents and businesses, the sewer district will have to charge the users/residents of the sewer district  higher fees to cover the legal fees.  The sewer district residents already feeling the pinch of much higher usage fees are looking to the town to cover the legal defense costs.

I asked the question, given the Malloy Plan B budget which would reduce aid to cities and towns to the order of 1.2B$, what effect would this have on Marlborough’s budget and would we be back in two weeks to vote on a new budget?  Bill Black answered, that only 25K$ of our budget would be subjected to Plan B cuts and they could be covered with the anticipated health care cost savings.

Later in a show of hands the budget was passed by a 80 to 81 vote.  After a point of order and much discussion, since the margin was less than 10% a re-vote was in order and proper.  A paper ballot was held and the budget was defeated by a 91 Nay to 76 Yea vote.

The Board of Finance got back to work and started crafting a new budget.   A new budget must be presented for town vote within two weeks.  The budget can not be increased, it must be decreased.

It was clear the residents of the sewer district caused the budget to be voted down or certainly provided a large number of nay votes, however it is not clear how or if the BOF can craft a budget allocating funds for legal relief for the folks in the district.

Harvard Prof of Economics

Taxing behavior reduces that behavior. Taxing work causes people to work less.

Here’s the punch line from the end of the article:

HERE’S the bottom line: Without any taxes, accepting that editor’s assignment would have yielded my children an extra $10,000. With taxes, it yields only $1,000. In effect, once the entire tax system is taken into account, my family’s marginal tax rate is about 90 percent. Is it any wonder that I turn down most of the money-making opportunities I am offered?

New York Times
By N. GREGORY MANKIW
Published: October 9, 2010

AN important issue dividing the political parties is whether to raise taxes on those earning more than $250,000 a year. Democrats say these taxpayers can afford to chip in a bit more. Republicans say raising taxes on those who already face the highest marginal tax rates will hurt the economy.

So I thought it might be useful to do a case study on one of these high-income taxpayers. Fortunately, I have one handy: me.

……..

Suppose that some editor offered me $1,000 to write an article. If there were no taxes of any kind, this $1,000 of income would translate into $1,000 in extra saving. If I invested it in the stock of a company that earned, say, 8 percent a year on its capital, then 30 years from now, when I pass on, my children would inherit about $10,000. That is simply the miracle of compounding.

Now let’s put taxes into the calculus. First, assuming that the Bush tax cuts expire, I would pay 39.6 percent in federal income taxes on that extra income. Beyond that, the phaseout of deductions adds 1.2 percentage points to my effective marginal tax rate. I also pay Medicare tax, which the recent health care bill is raising to 3.8 percent, starting in 2013. And in Massachusetts, I pay 5.3 percent in state income taxes, part of which I get back as a federal deduction. Putting all those taxes together, that $1,000 of pretax income becomes only $523 of saving.

And that saving no longer earns 8 percent. First, the corporation in which I have invested pays a 35 percent corporate tax on its earnings. So I get only 5.2 percent in dividends and capital gains. Then, on that income, I pay taxes at the federal and state level. As a result, I earn about 4 percent after taxes, and the $523 in saving grows to $1,700 after 30 years.

Then, when my children inherit the money, the estate tax will kick in. The marginal estate tax rate is scheduled to go as high as 55 percent next year, but Congress may reduce it a bit. Most likely, when that $1,700 enters my estate, my kids will get, at most, $1,000 of it.

HERE’S the bottom line: Without any taxes, accepting that editor’s assignment would have yielded my children an extra $10,000. With taxes, it yields only $1,000. In effect, once the entire tax system is taken into account, my family’s marginal tax rate is about 90 percent. Is it any wonder that I turn down most of the money-making opportunities I am offered?