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Guest Post: The Structural Endgame Of The Fiscal Cliff

Tyler Durden's picture




 

Submitted by Charles Hugh-Smith via Peak Prosperity,

To understand this endgame, we need to start with the financial and political basics of wealth and power in the U.S.

1.  Wealth and thus political power are highly concentrated.  The dynamics of rising wealth disparity and the increasing concentration of wealth are debatable; the disparity is not.  Roughly 70% of all financial wealth is held by the top 5%; within this top layer of ownership, the top ½ of 1% hold an outsized share.

2.  This preponderance of wealth in the hands of a few translates into an equivalent preponderance of political power, as there are no real limits on the purchase of political influence, favors and power.

3.  The U.S. income tax is highly progressive; most Federal taxes are paid by a minority of the citizenry.  The top 1% of taxpayers reported almost 17% of all taxable income and paid 37% of all income taxes.  The top 5% reported 32% of all income and paid 59% of the taxes, and the top 10% earned 43% of the income and paid 70% of the taxes.

The top 25% (those earning more than $66,193) paid 87% of the taxes.  The bottom 50% of taxpayers, roughly 70 million people, earned 13% of the income and paid 2% of the income taxes collected.

4.  There are roughly 127 million people who receive government transfers or benefits.  Sixty-one million recipients of Social Security and Medicare and 66 million people receiving welfare (SNAP food stamps, housing credits, Medicaid, etc.)  Since there are about 115 million full-time jobs in the U.S., this means there are 1.1 government dependents for every full-time worker in the U.S.  (For context, there are 315 million Americans and roughly 142 million jobs.  About 38 million of these jobs are part-time that pay less than $10,000 annually.  Fifty million wage earners earn less than $15,000 a year, and 61 million earn less than $20,000 annually.)

The Federal government counts a person who is self-employed and earns $100 a year as "employed" and a person who works one hour a week as "employed."  As a result, the only meaningful metric is full-time employment.

The top 25% who pay most of the taxes, roughly 30 million people, are a political minority compared to the 127 million people drawing direct payments/benefits from the Federal government and the 65+ million who pay essentially no income taxes (though they do pay the 7.65% Social Security/Medicare payroll tax).

5.  This progressive tax structure is based largely on earned income; i.e., wages and self-employed income.  Unearned income (rents, dividends, stock options, hedge fund management fees, etc.) is treated much differently than earned income.  Unearned (rentier) income is governed by highly complex tax codes that lend themselves to politically controlled loopholes, subsidies, and exclusions. As a result, some profitable corporations not only pay no tax but actually receive subsidy payments from the government.  In other cases, politically powerful enterprises have tax laws written specifically to limit or erase their tax burden.

The tax code treats unearned income quite differently from earned income in many other ways.  For example, all unearned income is excluded from the Social Security/Medicare payroll taxes.  A self-employed person pays 15.3% of their earnings in Social Security/Medicare payroll taxes; a person receiving the equivalent sum in rents and dividends pays zero Social Security/Medicare payroll taxes.

6.  The assets that generate unearned income are highly concentrated, and as a result so is the unearned income.  The top 1% owns twice as much stock-market wealth as the bottom 90%.  This income-producing wealth enables the top 1% to act as a financial aristocracy, buying influence and favors from equivalently concentrated political Elites.

This preponderance of ownership of income-producing assets is reflected in the income stream flowing to the top 5%:

7. Those without meaningful unearned income have seen their real incomes drop substantially.  Real household income has declined almost 10% since 2000:

Net worth has also declined as serial bubbles in stocks and housing popped:  American Households Hit 43-Year Low In Net Worth

Here is another look at the data.  Note that the drop in all household income is less than the decline in working-age households.  This is the result of Federal transfer payments to retirees, those on disability, aid to low-income households, etc., paid for with unprecedented deficit spending ($1.3 trillion annually).

8.  Federal spending has followed an exponential trajectory.

Social Security costs over $800 billion, Medicare and Medicaid costs total about $800 billion annually, and the Pentagon/National Security budget is around $800 billion.  These three consume all Federal tax revenues.  Add in interest on the ballooning national debt ($220 billion to owners of so-called external Treasury debt) and the nation is running a $200 billion deficit even if the rest of the $1.1 trillion Federal spending were to magically vanish.

Federal expenditures have skyrocketed in the past 12 years, far exceeding inflation:  http://globaleconomicanalysis.blogspot.com/2012/12/congressional-spending-problem-in-easy.html

9.  Tax receipts topped out at $2.4 trillion, leaving a structural gap of $1.3 trillion.

Put these structural dynamics together and the endgame becomes clearly visible: Politically, a Tyranny of the Majority comprised of those who draw direct transfers/benefits from the Federal government, is ruled by the top ½ of 1% financial aristocracy who own the majority of income-generating assets.  The minority, who pay most of the taxes (the 24.5% between the majority and aristocracy), will see their taxes rise as the aristocracy buys loopholes and exclusions while the bottom 50% pay no income tax.

Financially, the Federal government’s spending has outrun the tax revenues being collected.  Structurally, Federal expenditures for entitlements (Medicare, Medicaid, Social Security, Veterans Administration, etc.) will rise as Baby Boomers retire en masse over the next 15 years, while tax revenues will stagnate along with earned income.

There is no way to square these circles.

The political foundation of America is starkly unjust.  An entrenched financial Aristocracy buys the complicity of the bottom 50% and retirees with Federal transfers – a Tyranny of the Majority.  The 24.5% below the Aristocracy who pay most of the Federal taxes are dominated by this alliance. This may be legal, but is it just? Even more critically, is it sustainable?

The Status Quo rests on this Grand Political Bargain:

We in the Aristocracy will pay significant taxes as long as we control the levers of financial and political power. We in the top 24% will pay the rest of the income taxes as long as we and our children can continue to live well and accumulate wealth. We in the "middle class" will continue to work hard as long as we have hope of bettering our lifestyle and the lives of our children. We in the bottom 50% and retirees agree not to threaten the top 0.5%'s power as long as we continue to get our government transfers and benefits.

This Grand Bargain is coming apart as the promises made to everyone cannot possibly be met.  Claims on welfare and disability programs are skyrocketing at the same time that the demographics of an aging populace are causing 10,000 people a day to enter Social Security and Medicare, the two costliest government programs.  Meanwhile, the upper middle class that pays most of the taxes has been slammed with lower income and a devastating drop in their housing-based net worth.

According to former Congress members Chris Cox and Bill Archer, writing in the Wall Street Journal:

Why $16 Trillion Only Hints at the True U.S. Debt

The actual liabilities of the federal government—including Social Security, Medicare, and federal employees' future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion.

That is roughly double the entire annual Federal budget.

They go on to note that “to collect enough tax revenue to avoid going deeper into debt would require over $8 trillion in tax collections annually.”  Expropriating the entire income of the top 25% of households that pay almost 90% of the tax and all corporate taxes would only bring in $6.7 trillion.

Clearly, the promises that have been made to 315 million Americans cannot be met, and the current strategies of financial repression (zero-interest rate policy, etc.) and massive fiscal deficits that subsidize favored cartels in defense, housing, education, and healthcare are unsustainable. The politically expedient “fixes” to the Fiscal Cliff (a slight increase in the tax rate on earned income above $250,000, etc.) will not fill the $86 trillion gap between what has been promised and what can be collected in taxes.

What few dare admit, much less state publicly, is that the Constitutional limits on the financial Aristocracy and the Tyranny of the Majority have failed.  This guarantees a future Constitutional crisis as each political class – the financial Aristocracy, the top 24% who pay most of the taxes, the dwindling middle class and the bottom 50% who depend on Federal transfers – will battle for control as the Status Quo collapses under the weight of its unsustainable promises.

In Part II: What Will Happen When We Hit the Fiscal Cliff, we explore the repercussions that will result from this crisis.  Looking at the three most probable outcomes that will impact U.S. households, 2013 looks like it is shaping up to be a year where there will be little shelter available to financial assets.

Click here to read Part II of this report (free executive summary; enrollment required for full access).

 

 

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Wed, 12/26/2012 - 16:13 | 3096978 davidsmith
davidsmith's picture

Here we go with this nonsense again:

 

the Constitutional limits on the financial Aristocracy and the Tyranny of the Majority have failed.

 

What, do you guys have it programmed in every six weeks to do an "endgame" article.  In this case, it's this idiot's notions of "Constitutional limits."  Pray tell, what are the Constitutional limits written into

 

West Coast Hotel v. Parrish

United States v. Carolene Products

 

These cases comprise the doctrine of our present Constitutional regime, the scrutiny regime.  Let me know, ignoramus.

Wed, 12/26/2012 - 16:19 | 3097009 NotApplicable
NotApplicable's picture

Well, they have to write about something!

Apparently, the script is all they know, as it defines them.

Wed, 12/26/2012 - 23:40 | 3098106 Radical Marijuana
Radical Marijuana's picture

Here are a couple of what I consider the most important transformations of the American political system from the original ideas in the constitution, gradually inverted to becoming perversely the opposite of what they were supposed to be:

The financial Aristocracy was the BANKS, and the CORPORATIONS that grew up around those BANKS

First and foremost, THE BANKS!!! The international banksters, using bribery, intimidation, and assassination, took control over the money supply, which then became a runaway vicious spiral.

The intention presumed in the constitution was that money should be backed by gold AND silver, and Congress would set the values for that. Those ideas were the basic definitions of the word "money." The basic idea of what "money" means was systematically inverted and perverted, so that "money" now means pretty well the opposite of what that word meant when the constitution was written. That gradually transformed to be "money" being made out of nothing, as debts, by private corporations, which controlled the government through corrupting the political process. The full history went back and forth, with sometimes victories, like through President Andrew Jackson. However, since the assassination of President Lincoln, everything has gotten worse, faster. The first step in that was back in 1874, by demonetizing silver in a blatantly unconsitutional way! Then the Federal Research Board, and the Income Tax, in 1913, both of which appear to be de facto violations of the constitution.

The problem is that, after it gets bad enough, the courts are just as much part of the corruption as all the other branches of government. The Supreme Court turns into All-Star professional liars, acting as apologists for the runaway political corruptions. The best old-fashioned example of that was the Dredd Scott case! However, your 2 examples illustrate the court allowing laws to intrude more and more, and to expand the interpretation of some clauses far, far beyond common sense interpretations, to effectively justify the opposite of what those constitutional provisions were intended to do! The 2 cases you cite were examples of the court adapting to prevailing political power situations, to overrule the common sense interpretations that were previously used, and instead, start finding more and more excuses to justify that line of decisions. One classic lie was that vulnerable groups need protection, which is then the excuse to act with immaculate hypocrisy to accomplish the opposite of what the spurious justifications state are the purposes. The drug wars were an endless series of constitutional exemptions which were rationalized in that way. The supreme example of that runaway insanity has been the development of "National Security" since 1947, and especially after 2001, when all the classic constitutional and common law protections of individual rights were gutted, with the reasons being the need for "security" which, of course, made the individual become far, far, far more insecure against governmental abuses of power than ever!

Second, around the BANKS grew up the CORPORATIONS:

The individual flesh and blood human beings becoming "persons," and then corporations becoming "persons," and thereby ending up with more real rights and freedoms than flesh and blood human beings. That was a perverse process whereby the expansion of the rights of human beings was extended to ALL human beings, then inverted and perverted to make the legal fictions of the personhood of corporations end up giving those legal entities effectively more legal rights and freedoms than human beings. The consistency of saying ALL human beings should be free and equal transformed into the justification that corporations would be more free, and superior to human beings. (Like the insane ghost of Dredd Scott, returned to haunt the house.)

Combined, those two trends created the runaway fascist plutocracy, of corporations growing up around banks, that resulted in the sovereign powers of "We the People" being privatized.

That is the context which which the Tyranny of the Majority emerges, which is AFTER the democratic republic has already been eviscerated, and the majority of people have already adapted to live inside a system in which banks and corporations have effectively taken control of the government. The majority of the People have already been reduced to political idiots. They have given away the power to make their money supply out of nothing to private banks, and have allowed an entire system of legalized lies, backed by legalized violence, to dominate them, and usurp the constitutional protections, which were supposed to protect individuals, become commandeered to protect the banks and corportations, with the complicity of the courts going along with that process, step by step. Under those conditions, it is only necessary to fool enough of the people, enough of the time, which is fairly easy to do, after the fascist plutocracy has already taken control over everything that those people need to live.

The "endgame" aspect of this is that the destruction of the democratic republic becomes a runaway juggernaut, that turns more and more people into its road kill. The Federal government of the USA was taken over by the best organized gangs of criminals, gradually, for more than a Century, and that has become so extemely bad that there are, on paper, almost NO constitutional rights and freedoms left which are still left uninfringed. The "rule of law" is eroded and undermined, as the fish rots from the head. The whole system gets worse and worse, until it becomes totally dysfunctional and collapses into chaos. What the government of the USA does abroad returns more and more to be done at home.

Wed, 12/26/2012 - 16:14 | 3096983 OutLookingIn
OutLookingIn's picture

Exactly as George Carlin said;

The rich collect most of the wealth.

The middle class provide that wealth.

And the poor are there to scare the shit out of the middle class so they keep on providing that wealth!

Wed, 12/26/2012 - 17:02 | 3097159 Woodyg
Woodyg's picture

Notice they only mention Income Taxes - never mind that if you add p Every tax and fee paid the poor pay a Much higher rate of overall taxation that the rich.

And Tyranny of the Majority? I'm sure the Majority wanted Nafta and the offshoring of their 30$ hr job for $200 a week in shitty unemployment checks.

Its the Tyranny of the .01% who have captured the gov - they own the Fed - etc

Funny we hung the sociopathic sob's from the nearest lamppost's at the endof WW2 but like cockroaches we didnt get them all and now they're scurrying out of the woodwork again.

Higher taxes or a noose?

Which will they choose this time?

Wed, 12/26/2012 - 17:50 | 3097352 flattrader
flattrader's picture

>>>The political foundation of America is starkly unjust.  An entrenched financial Aristocracy buys the complicity of the bottom 50% and retirees with Federal transfers – a Tyranny of the Majority.<<<

Yep.  The above is such crap.

Does this asshole really think that those who recieve gov payments are in league with the "Aristocracy"? or that they somehow feel "compensated" and are therefore "complicit" ?

This twit is just amazing.

It wasn't all that long ago he was trying to blame "everyone" along the lines of that corporate bankster bitch Mark J. Grant.

Wed, 12/26/2012 - 16:15 | 3096991 pods
pods's picture

So a system where certain folks (the moneyed class) can have first crack at newly borrowed money, or even better, get paid interest to create and lend it fair better than all us wage slaves?

pods

Wed, 12/26/2012 - 16:28 | 3097039 NotApplicable
NotApplicable's picture

Funny how all of this used to be avoided merely by the market being "smart enough" to discount paper IOUs.

Wed, 12/26/2012 - 16:18 | 3097001 Printfaster
Printfaster's picture

The tyranny of the financial aristocracy and the tyranny of the majority was enshrined respectively in the 16th (income tax) amendment and the 17th (direct election of senators).

The 16th took the primary power of taxation away from the states.  Notice that when the feds raise taxes, it comes at expense of the ability of the states to raise taxes.  Not the other way around.

By removing the ability of the state legislatures to name the senators and represent the legislators (remember students, the US was a republic, this pushed it into democracy with all the comes with a mob) and control the federal government taxation.

Once could argue that the 16th made the 17th inevitable.

Wed, 12/26/2012 - 16:22 | 3097023 NotApplicable
NotApplicable's picture

I'd argue that the coup that created the Constitution made it inevitable, but I don't find it worth the effort. One form of enslavement pretty much ends up like any other.

Wed, 12/26/2012 - 16:18 | 3097004 NotApplicable
NotApplicable's picture

As long as CHS et al., continue to accept dollars as payment for goods and services, ALL obligations can be met, NOMINALLY.

Wed, 12/26/2012 - 16:19 | 3097007 Gimleteye
Gimleteye's picture

the sooner the better

 

Wed, 12/26/2012 - 16:40 | 3097086 hooligan2009
hooligan2009's picture

the argument is circular...the rich earn the most money and pay the most tax.

the ability to migrate upwards from bottom 50% to middle 45% to top 5% has been impaired by successively stupid governments that have allowed predatory corporations to re-site manufacturing offshore, without conditions "quantifiably" compelling NIC's to compete on an equal footing (like build out infra structure, education and health to benefit countries with this expertise like America). 

these same successively stupid politicians have instead, by the law of stupid government consequences (SGS), facilitiated downward migration from the top 5%, through to the middle 45% and the bottom 50%. 

i don't blame the rich or the successful or claim that there is a conspiracy of the 1% or 0.1% to control stupid governments. Of course, I do not say that corruption does not exist, but thats catchable and punishable. We "choose" to let corruption go unpunished whether the fifth column is corrupt or not is a moot point when the quality of the argument can be made in this new format of the fifth column (blogs like ours) which is increasingly morphing into a new fourth estate. 

perhaps I still need to have the last vestiges of optimism removed from my frontal lobe, but i believe that the rich are rich despite SGS, not because of SGS.

Wed, 12/26/2012 - 18:31 | 3097489 Anusocracy
Anusocracy's picture

"the rich are rich despite SGS"

Not in the Democratic Republic of Bananamerica.

Wed, 12/26/2012 - 18:44 | 3097535 blunderdog
blunderdog's picture

   ...i believe that the rich are rich despite SGS, not because of SGS.

It's evolution in action.  What tends to happen is something is done and some given detail is missed, leading to some unforeseen outcome for someone who happens onto it.  If the outcome is extremely rewarding, the discovery is exploited mercilessly.

For a good example, see the CRA--it wasn't that bankers didn't KNOW that semi-literate construction workers couldn't afford $250,000 mortgages, it was that they didn't have to worry about it because they were going to sell them to Fannie/Freddie, so it didn't make a lick of difference if the borrower defaulted.

The problem is, most folks ignore the fact that "robbing the government" is the SAME THING as "robbing the taxpayer." I've had conversations in which folks who've shared some details of their Medicare-fraud with me have, WITHOUT TAKING A BREATH, gone on to bitch about government taking their taxes and giving them to welfare queens who manipulate the system.

So what to do?  Some of the biggest thieves are taxpayers who now want to piss and moan about how gummit was so wasteful with "their money."  But it wouldn't have been "their money" in the first place if they hadn't benefited from the ability to rip off their future selves, one way or the other.

That schism in the mind isn't a problem of government policy.  Something else is going on there.  Self-deception can't be eased with budgetary changes. 

(This has always been around, too--if you recall Brutus accusing Cassius of thievery and then complaining that he wasn't getting a share of the loot.)

Wed, 12/26/2012 - 19:37 | 3097663 hooligan2009
hooligan2009's picture

i agree with what you say and will defend your right to say it...to the death...(notice i dropped the "dis" from the "agree". I still think the SGS are responsible for bank guarantees and welfare though.

Wed, 12/26/2012 - 20:56 | 3097808 blunderdog
blunderdog's picture

I agree with you for the most part.

I just think the fundamental problem is that decision-making by committee is completely incomprehensible, so you never know what's going to come out of institutions like "Congress" and "the WTO."

There's certainly no reason to expect those decisions to be either sane or logical.  And that's why it's so hard for any individual, no matter how motivated, to spot the failures.  They can appear anywhere.

(Oh, I didn't junk ya, BTW.  In fact, I'm +1'ing now.)

Wed, 12/26/2012 - 16:41 | 3097088 Zap Powerz
Zap Powerz's picture

Decentralization would amerliorate some of these problems.

Nothing can "fix" human nature and the consequences of human nature are ultimately unavoidable.

Wed, 12/26/2012 - 16:53 | 3097130 mrktwtch2
mrktwtch2's picture

i know i wont be in the top 5% someday but im shooting for the top..10%..i think the cut off is 85k??

Wed, 12/26/2012 - 17:38 | 3097297 flattrader
flattrader's picture

I'll be shooting for the top .01% with my constitutionally protected (for now) fire arm if the opportunity presents itself.  And if that protection is threatened, I'll certainly be shooting.

Wed, 12/26/2012 - 18:11 | 3097425 Salon
Salon's picture

Lol every time I get close they keep moving the goal post.

Wed, 12/26/2012 - 17:04 | 3097164 virgilcaine
virgilcaine's picture

Looks ripe for revolution.

Wed, 12/26/2012 - 22:00 | 3097917 FreedomGuy
FreedomGuy's picture

If there is an American revolution it will only be after some sort of collapse and I believe it will fragment among several disparate groups that will divide roughly three ways; one towards more socialism, one toward libertarianism and a middle group that wants the old America back but not particularly ideological.

I would bet on the leftists as they have severely weakened America and caused people to not believe in themselves and mistrust their neighbors. They are usually well organized and united around an all powerful government.

Thu, 12/27/2012 - 03:04 | 3098143 Radical Marijuana
Radical Marijuana's picture

A "Second American Revolution" should be intellectual, or else will become suicidal. Just as there is no coherent theory of how to fight a real war with weapons of mass destruction, there is no coherent theory of how to have a violent revolution inside a country with an abundance of weapons of mass destruction.

The bigger picture of the demographics is a relevant overview to the economic statistics presented in this article!

To over-simplify my points:

Women who have less than 2 children are committing suicide.

Women that had more than 2 are declaring war on neighbors.

According to that view, the rich are tending to commit suicide, while the poor are declaring war on the rich. That is just another of the many, many ways to preceive the unsustainable runaway insanity of the current social situation. It can not be fixed with a violent revolution. That would only enable things to get even worse, faster. Of course, that is what I expect to happen. The richest are planning to increasingly soft kill the poor, and then, shift gears towards more genocidal war, along with democidal martial law, as the "solution" to the demographic problems. The only saner solutions (which appear to require a prodigious series of political miracles to happen) require profound paradigm shifts in our combined militarism, and monetary systems. In the terms of this article, there needs to be a far, far more radical rewriting of the social contract. The human and industrial ecologies, (within the context of the natural ecologies) must be included into the political systems in overt ways. Primarily, the theory is that all different groups negotiate new death controls (which our totally bullshit-based society mostly calls "birth controls.") There needs to be a radical reconstruction of the death control systems, along with the debt control systems. None of those things can be divorced from each other, or compartmentalized out of the public debates. There should be mechanisms to connect reproduction to production, so that the combined murder/money systems work together, within the total evolving ecology.

Of course, realistically, what is far more likely to happen instead is the established systems going through psychotic breakdowns, and collapsing into crazy chaos, were insane revolutions match insane wars, along with even more insane martial law. There will be an incoherent "revolution."

Inside that context, my fantasy is outside of your expectations, FreedomGuy. I hope that, through that collapse into chaos, there will survive a new elite, a transnational scientific community, which will be forced to become politicalized, in order to survive, and will then apply scientific ideas to social problems, in radical ways that move outside of the limits of the kind of oxymoronic scientific dictatorship systems that are dominating the world today, because those operate within the established money/murder systems. I like to day dream that the collapse into chaos of the Neolithic civilization will enable the emergence of a Translithic civilization. I like to identify with a new ruling class, which, at present, barely exists in any significant ways. I see the only hope for a good and genuine "Second American Revolution" to be as an aspect of the Second Enlightenment.

Anyway, all of the 3 groups which you list, FreedomGuy, I characterize as reactionary revolutionaries, and I dislike them just as much, if not more than, the established elites. I would NOT bet on any of those groups. Your bet is based on the "leftists" still being the primary foil and tools of the current elites, so that nothing really changes. That only is possible if the system was not as totally insane as it really IS! The collapse into chaos will be serious, and the return to a saner reality would not be easy, especially since it is quite impossible to predict which of the creative alternatives will turn out to be the most practical ...

Wed, 12/26/2012 - 17:12 | 3097188 Miffed Microbio...
Miffed Microbiologist's picture

Mr miffed downloaded the newest version of Quicken just to get an idea what the AMT was going to do to us assuming there is no patch and we go over the cliff. I've been cleaning projectile vomit of the walls all afternoon. If this isn't the final coffin nail that destroys the middle class I can't imagine what will. I feel like Boxer the horse in Animal Farm....we're going to the knacker.

Miffed:-)

Wed, 12/26/2012 - 17:13 | 3097191 pragmatic hobo
pragmatic hobo's picture

leave the social security out of the discussion ... it's not paid for with taxes.

Wed, 12/26/2012 - 17:48 | 3097345 are we there yet
are we there yet's picture

Sadly, it is a raided ponzi fund. The only ones to have a true retirement fund is Congress.

Wed, 12/26/2012 - 22:26 | 3097978 egoist
egoist's picture

I sent something to McCaskill after she poked fun at Trump receiving Medicare (as one of the rich). Here's her reply:

Dear Mr. {egoist}, Thank you for contacting me regarding retirement, health care plans, and compensation for members of Congress. I appreciate hearing from you and welcome the opportunity to respond. Members of Congress, like all federal employees, pay taxes and contribute to Social Security, Medicare, and other federal programs. Members of Congress also pay state and local taxes which vary depending on where they live. Contrary to rumor, Members of Congress do not receive their full Member salary for the rest of their lives. In fact, retirement benefits and requirements for Members of Congress closely mirror those of other federal employees. Members of Congress elected after 1984 must enroll in the Federal Employees Retirement System (FERS). Under FERS, Members of Congress become "vested," or eligible to receive partial retirement payments upon reaching retirement age, after five years of federal employment. With each additional year a member serves, either in Congress or in some other federal service, the member is eligible to receive a larger portion of his or her salary upon retirement as a taxed annuity payment. After retirement, federal employees receive a Cost of Living Adjustment (COLA) based on the Consumer Price Index for Urban Wage Earners, the same metric used to calculate COLAs for Social Security recipients. Members may also elect a reduced annuity payment in order to provide for spouses or dependent children after death. Members are not eligible to receive any type of retirement benefit if they are convicted of certain crimes such as bribery, perjury, or espionage. For more details on members' and federal employees' retirement plans, you may visit the Office of Personnel Management's website at http://www.opm.gov/retire/index.aspx. Members and retired Members of Congress, along with other full-time federal employees, are eligible to participate in the Federal Employees Health Benefits Program (FEHBP). The FEHBP offers several choices for health insurance plans that vary depending on where a federal employee lives. These plans include health maintenance organizations (HMOs) and fee-for-service plans. Additionally, federal employees have the option to purchase additional coverage for vision and dental health. You may view FEHBP plans available to federal employees at the Office of Personnel Management's website at http://www.opm.gov/insure/health/planinfo/. Yearly automatic pay adjustments for members of Congress were written into law in the Legislative Reorganization Act of 1946 (2 U.S.C. 31). In recent years, including fiscal year 2012, Congress has acted to block the pay increases. However, I do not believe a temporary solution is sufficient. Since coming to the Senate in 2007, I have been working to permanently end the automatic pay increases. To this end, I have introduced S. 133, a bill that would, if enacted, completely halt automatic annual cost-of-living adjustments for members of Congress. Employees in the private sector do not receive automatic pay raises and neither should elected representatives. I know that many Americans are struggling in this economy and that many more do not feel Washington is listening to them. I have made it a priority to visit with Missourians as often as possible and find ways to address Missourians' concerns. This is also why I have been working to change how Washington operates, including championing efforts to reduce government spending, improve transparency in the federal contracting process, and protect the rights of federal whistleblowers who identify waste, fraud and abuse within the federal government. Again, thank you for contacting me. Please do not hesitate to contact me in the future if I can be of further assistance to you on this or any other issue.

Sincerely, Claire McCaskill United States Senator

Wed, 12/26/2012 - 18:42 | 3097528 DosZap
DosZap's picture

leave the social security out of the discussion ... it's not paid for with taxes.

How so?, SS taxes have come out of every business, and paycheck earner in this country.

Wed, 12/26/2012 - 18:46 | 3097539 blunderdog
blunderdog's picture

There's a popular claim that FICA isn't a tax--it's some other special kinda thingie.

Wed, 12/26/2012 - 20:56 | 3097810 Diesel Seven
Diesel Seven's picture

Yep, kinda like calling a dog turd a Tootsie Roll.

Wed, 12/26/2012 - 21:14 | 3097839 akak
akak's picture

 

leave the social security out of the discussion ... it's not paid for with taxes.

If I could have, I would have given you 100 down arrows for the ZeroHedge "Most Stupid Comment of the Day".

There are only four words I know which possibly describe the forced collection of funds at gunpoint --- taxation, theft, fraud, and extortion.  If you believe that SS payments are NOT taxes, please tell us which of these three other words apply.

Wed, 12/26/2012 - 17:36 | 3097288 lakecity55
lakecity55's picture

Hmmmmm..... isn't that like .......29% unemployment?


Wed, 12/26/2012 - 18:09 | 3097419 Salon
Salon's picture

People converting their Roths proly made a mistake.

Government bennies including social security will be means tested with lower SS payments and extra medicare fees for those with incomes greater than 36000 per year.

You paid a tax now. And you will pay a "tax" later.

Me?

What they cant find I dont declare, and they cant tax it. I mean "means test" it

Wed, 12/26/2012 - 18:23 | 3097463 machinegear
machinegear's picture

If we take the first pie chart showing the distribution of wealth then overlay it with the distribution of firearms, would that not be a reasonable predictor of our future?

Wed, 12/26/2012 - 18:30 | 3097488 Oldwood
Oldwood's picture

Humans really are amazing. I can't imagine another species going to this much trouble to screw each other over. I think if there are space aliens out there, the only reason they haven't come and wiped us out is that we provide so damn much entertainment! Kind of like why we don't kill puppies that crap all over everything and shred the curtains.

Wed, 12/26/2012 - 19:22 | 3097629 Anusocracy
Anusocracy's picture

The art of screwing each over was how we got here. Others were considered resources to use but with the caveat that they were needed for one's own survival. Presently, their resources are needed but they are not.

As far as space aliens go, I think all advanced civilizations wipe themselves out at about the point we are at.

An advanced civilization is just a mega-species that creates internal evolutionary pressures that biological evolution can't cope with. Then it fails.

Wed, 12/26/2012 - 20:53 | 3097803 Diesel Seven
Diesel Seven's picture

Ok, this site is going to the dogs--lawyers quoting case law, yep that'll fix it--more lawyers. It's just a simple equation that will (must) achieve equilibrium in the long-run. Thank God we're all dead in the long-run. Weep for the children. Only a fool would believe that the BRIC countries will keep with the status quo forever. Just watch the shit start to flow once Japan starts up the printing presses for real.

Wed, 12/26/2012 - 21:44 | 3097886 are we there yet
are we there yet's picture

IT turns out Columbus was wrong, the earth is flat and we are going off the edge.

Thu, 12/27/2012 - 08:41 | 3098506 Stud Duck
Stud Duck's picture

Pull a Granada on the Cayman islands, confiscate the 23-32 trillion the rich have hidden away without paying taxes, problem solved!

 

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