Category Archives: Finance

How finance affects current events

The Difference Between Private Equity, Venture Capitalism, and Vulture Capitalism

The Difference Between Private Equity, Venture Capitalism, and Vulture Capitalism
David Schlecht

With Romney and Obama painting such different pictures of these concepts, let’s try to nail down what they really mean. Another term that is often used but not quite as often as it once was is the term, LBO, or Leveraged Buy Outs.

Venture Capitalism

Venture Capitalism is the easy one. If you have money in a 401K or a mutual fund or if you own stock in a company, in a simple way, you’re a venture capitalist. You’re venturing your capital for part ownership in a company. This is really small potatoes, though. The more accurate term is when someone with money buys part of a company, usually in the way of stocks, so the company will have capital to succeed as a business.

This is what capitalism is all about. This is good for America when it’s regulated appropriately.


Private Equity and Vulture Capitalism and Leveraged Buy Outs

Private Equity and Vulture Capitalism and Leveraged Buy Outs are all pretty much the same thing.  For a good video on this, check out Robert Reich’s Eight Steps. In a nutshell, a vulture capitalist will find a successful business and buy it by taking out a loan and assigning the loan to the business. Then, they strip and squeeze the business until nothing is left. Then they file bankruptcy and steal the employee pensions or if the company doesn’t go broke, they sell it off and make a 20% commission on the sale, all the while skipping out on their income taxes and sticking you and me with the bills.

The scam used to be illegal but thanks to Reagan, it is now just fine. It used to be called leveraged buy outs but it made such a  bad name for itself that they decided they needed to change the name. Now they call it Private Equity firms.

Romney’s Bain was a vulture capital company, an LBO. A Private Equity firm. Once or twice they would invest outright, as venture capitalists, but in most cases, they were just out to pump and dump companies and you and I got stuck with the unemployment insurance payments, welfare payments, pension payments, and the taxes for the bankrupt companies and for tax breaks for the vultures.

Don’t let Romney fool you. His company was not out to create jobs. It was out to destroy them and steal the pensions.

Oh, yes, he wants to run America the same way.

Fixing America’s Economy

Fixing America’s Economy

There is a fix for America’s current financial, political, education, and health industry disasters.

Any addict hoping for recovery must first admit what the problems are. America must wake up to the cause of our current problems and admit that they are problems that needs addressing.

In all the cases mentioned above, there is one primary underlying addiction that is perpetuating the disaster. For those who are willing to take the time to look at our history, it is obvious that we had a handle on these problems for the most part of the past 100 years. We had the world’s best education systems, we had the world’s best medical, we had the world’s leading economy.

But, looking back at the 1920’s and you will see that, like today, this wasn’t true. They were the unregulated “Roaring 20s” but it lead directly into the world’s worst Depression of all time. What have we been doing right since the 1920’s and what are we no longer doing right, today?

The answer is capitalism, or more accurately, unrestrained greed.

We used to have the world’s best education system. But, then we started getting stingy with our education dollars, and today we want to give a big slice of the education dollars to billionaires in the way of privatized schools and vouchers.  The most successful countries in the world today, have a tax rate almost double what we have in America and aren’t afraid to spend it on education.

Got that? Double.

Why don’t we have higher taxes? Because greed has taken control of our country. Unrestrained Capitalism has us believing that it’s in our best interest to abandon all the things that made America strong over the past 100 years: unions, education dollars, regulations, taxes.

When you hear the term “free markets” it is code words for taking away what little restraints we still have on greedy capitalists.

America used to have laws that said insurance companies must be non-profit as well as our hospitals. We’ve abandoned those regulations and look where it’s gotten us. The medical industry is working diligently to restrict the number of doctors we have in America.  Why? Well, for greed, and nothing more. Fewer doctors means higher profits for doctors.

Now, all you Fox zombies, just hold on. I’m not saying we need to do away with capitalism, I am saying we need to get back to the days when we weren’t afraid to regulate it. Regulations are our friends.

Since the days of Reagan, our politicians are afraid to break up the big monopolies. They even express interest in advancing them, if they’re a Republican, and they’re too afraid to do anything if they’re a Democrat.

Our capitalism is running amock and we have to regain control of it. But, that will be impossible until we come to admit that we have a problem. Like a typical addict, we have to admit we have a problem before we can fix it.

The 99% Movement is succeeding at bringing this to our attention, but the greedy capitalist are doing their best to discredit the movement. We have to all wake up and realize that the greedy corporate news sources are dead set on preventing us from taking back control of our country. It’s time to turn off the broadcast television and time to admit we have a problem. The problem is unrestrained capitalism and therein lies the fix.

What are the Commons?

What are the Commons?
David Schlecht

We’ve posted many times regarding the importance of protecting our commons. Check out some of our previous posts, such as,

There’s also a good web resource that you should check out that has a worthwhile perspective on the commons.

Reading any of the above links will give you a good grasp on the commons. But, in a nutshell,

  1. General Commons: The Commons are those things that we all hold in common, such as our country, our clean air, clean water, our resources like minerals and oil, our soil, our common needs such as health care, and our common defense.
  2. Common Wealth: Of these commons, some are assets, such as our soil and our minerals, some are liabilities, such as our government and our health care, and some are neutral, such as our military. Of course, different ways of looking at each common may put the common in a different category, such as defense is also a liability as it will cost us unending investment to maintain, and a country and our government is an asset but will also cost us money. Any common that is viewed from the perspective of an asset is considered a common wealth.

When a logging company harvests the lumber off our land, they are taking our commons and making a profit from them. It is morally right that the profits should be used to repay the people for the loss of their common wealth. The same goes for all our common wealth. Oil companies are not just stealing the oil that is part of the common wealth, but they are stealing the oil from our future generations. Morally, they need to be reimbursing us for the stripping of our wealth and when they don’t, they’re stealing from us.

When a company flushes toxins and pollution in our air, they need to be reimbursing us for the reduced value of our breathing air.

Our common wealth can be divided into renewable and non-renewable commons. Renewable common wealth, such as lumber, is still costing you and me because of the depletion of the nutrients in the soil. If the logging company renews the forests to their original health and renew the soil, then they’ve repaid the common wealth. Anything less is a “taking” that should be paid for.

We have to put a stop to the plunder and pillage of our common wealth and the commons of future generations and we have to stop today. Every day we procrastinate is more value lost that will never be repaid by the companies stealing our commons.

Comparing Employment with the Great Depression

Comparing Employment with the Great Depression
David Schlecht

With the games that our government is constantly playing with the unemployment numbers, it’s impossible to get the real numbers and also impossible to compare today’s Great Recession with the Great Depression of the 30s.

Some of the many games is we no longer count the homeless, we don’t count the unemployed who don’t show up in the census. We often don’t even count those who have exceeded their 99 weeks of benefits. We don’t count those who are under employed, or those who are flipping burgers with a BS degree. Anything to make the numbers look better, and our government is using it.

One way to compare the depth of the current disaster with the last Republican Great Disaster is to compare changes in GDP, our Gross Domestic Product. This is the calculated value of the goods and services produced by the country.

Why should we compare these? These numbers show, not just how much we produce, but how much we’re working. The GDP goes up for reasons other than employment, but it’s a good general indicator.

Here is a graph showing the relative changes in GDP over the past recessions.

Changes in GDP in the past recessions

What you should pay close attention to is the length of time it takes to get back to normal GDP output, or in other words, back to normal employment.

Considering that we’re nowhere near back to normal in GDP, we can conclude that we are nowhere near back to normal in employment. Believe me, 8% is nowhere near the real rate  of unemployment.

And, considering that we haven’t even touched fixing the issues that triggered the current recession, and that we’re nowhere near putting Humpty Dumpty back together, perhaps we should hold on to our hats, or better yet, our wallets a while longer.

Enough with the Austerity Already

Enough with the Austerity Already
David Schlecht

Why are we still struggling with this Republican Great Recession five years afterwards? Even the Republican Great Depression of the 30s didn’t take this long to turn around, so why is this one?

If you look at your history books, you’ll see that the Republican austerity policies were soundly rebuked within three years and Hoover was gone with them. Unfortunately, now, we are still clinging to the promises of austerity. In fact, the entire world is experimenting with the dangerous drugs of austerity and the whole world is suffering.

In fact, there has never been a country that has successfully cut its way to prosperity. The only way to get this log jam freed up is to start taxing the rich like we did at the end of the last Great Depression, you know, 90%, and start spending on lots and lots of work programs.

And, this country drastically needs an investment in our infrastructure. There is no better marriage of needs and solutions than to rebuild our crumbling country and start investing in our future generations by fixing our education system.

Post-Industrial America

Post-Industrial America
David Schlecht

In a previous post, I expanded on the value-producing aspect of manufacturing. This discussion explains why America needs a manufacturing industry.

But, what happens when the society becomes so wealthy that they no longer need to or are no longer inclined to continue purchasing? They still have the money and want to do something with it, but how many boats do you buy before you get bored buying boats?

So, along comes the service sector to give the buyers something new to buy. I don’t want another boat, I want someone to mow my lawn so I can enjoy the boat I already have. I want to go out to a nice restaurant, I want to see a play, I just have to go see the latest comedy or magic show…

In this case, the service industry is a symbiotic parasite on the society in that it gives back in return for what it takes. It serves a purpose but it also drains valuable resources from the society.  When you no longer have a manufacturing industry, there is no longer any symbiosis and the parasitic service industry begins to impoverish the society.

This is, of course, all academic, since America is not anywhere near the point where we no longer need anything. America needs plenty. Have you seen the condition of our roads? Or Bridges? Our Internet? Our cell phone infrastructure? We need plenty of manufactured products.

As long as we’re manufacturing what we need and have a little left over to export, then our society remains strong. When we no longer manufacture, then eventually there will be no one left to buy the services from the service industry.

I suppose we’ve all heard the argument that making hamburgers at the local fastfood shop is adding value to the meat so it’s really manufacturing.

This is an awfully weak argument but we can’t dismiss it out of hand. There is some value, but the value is lost the moment the product is consumed. This stems from the old argument of “guns and butter”. Paying for butter is a short-lived investment, but buying guns gives us the value of the weapon for years to come. This was Reagan’s argument for spending money on Star Wars and not Welfare.

The problem here is that the guns, or bombs will eventually be used and will be gone. In a war, it’s amazing just how fast these inventories can disappear, how fast the wealth can disappear.

America needs to get back to building things that last.

Eve of Destruction

Eve of Destruction

Matthew K.

If you’ve spent any time looking back to see what caused the last great depression of the 1930s, you will see that it was the drop in taxes, especially on the wealthy, that triggered the depression. A lack of financial oversight and foolishly low taxes.

We put regulations in place and raised the tax on the wealthy to 90% and we were good for almost a century.

Now, we’ve blown up the regulations and the Republicans have lowered taxes on the rich and guess what.

The lousy part is that even the Democrats in Congress are sniffing glue. It’s not just for Republicans any more. Harry Reid says we need to cut more programs to balance the budget.

Hello Hoover!

It didn’t work back then and it was thinking like this that caused the depression. We need to put a stop to this today. Tomorrow will be too late.

Call your congressmen and the White House (202.456.1111) and tell them you don’t want anything but a clean bill to increase the dept limit. After that, we can take a moment to read our history books and see what caused the depression and what stopped it.

No more slashing government spending until we’re out of this hole.

Call them now. Call them tomorrow and call them every day until they start putting our tax dollars into stimulus programs rather than in the pockets of the rich.

Call today!

Who Owns the Deficit

Who Owns the Deficit
Dave Speck

So we hear the republican chanting over and over how the sky is falling if we don’t balance the budget, even if it means we have to take food out of the mouths of our elderly and sick and weak and poor. The world will end. Why all the noise?

The Republicans voted to raise the debt ceiling 18 times during Reagan’s administration. Got that? 18 times. During that time Reagan increased our nation’s deficit by three trillion dollars, more than all the previous presidents combined.

Where did all that money go? It went to tax breaks for the rich, mostly. That and to the military budget and his failed Star Wars program.

Then, along came Clinton and he balanced the budget and had a surplus that would have paid off the deficit in 10 years.

Where did all this money come from? Clinton ended “Welfare as we know it.” In other words, he stole it from the poor. He also raised taxes on the wealthy a couple percentage points.

Then, Bush added almost five trillion dollars to the deficit and the republican voted seven times to raise the debt ceiling.

Where did all that money go? Tax breaks for the rich and two illegal wars.

Then the economy crashed, as it always does when you lower taxes on the rich, and Bush pushed through another trillion dollars to the banker crooks.

Now, Obama wants to add a small fraction to the debt, less than 8%, and the Republicans are threatening to bring the entire country down unless we take more money from the poor.

Do you see any sort of pattern here? The republicans ran up almost all of the 10 trillion dollar debt and they don’t want to pay for it. They want the poor and the weak and the elderly and the sick to pay for their big party.

The republicans and the rich have been living large for the past 30 years at our expense and now they want you and me to pay for the bill.

What would you say about a political party that does this? What would you say about a party that is willing to crash our economy if they don’t get their way on everything? We’re in this mess because of the tax breaks to the rich and the republicans are saying they will destroy the country if we don’t give more tax breaks to the rich.

What party does big business own?

US Debt per GDP


Class Warfare?

Class Warfare?
Dave Speck

Class Warfare

America’s middle class has been doing with less and less over the past 30 years while the rich have been getting richer and richer. There has been a class war going on for 30 years folks, and it’s time we started waking up to the reality. Not only are the rich making more than they ever did before, but they already own most all the wealth in the entire country.

It’s time to wake up, America. There’s a class war going on and you’re getting killed.

Listen to Senator Bernie Sanders.

Balanced Budget Amendment

Balanced Budget Amendment
Dave Speck

We’ve been hearing a lot of commotion lately by the Republicans about how we need a balanced budget.

At first blush, this might sound like a great idea. After all, don’t you and I have to balance our checkbook at the end of each month?

No, actually, we don’t. We can go out and borrow any time we feel like it.  In fact, if our federal government becomes hamstrung with a limitation like this, it would be the best thing for the billionaires and the worst thing for you and me. That’s why the Tea Baggers are all over this. Their billionaire leaders (behind the scenes) are telling them how important it is that the government can’t borrow money.

But, let’s look at what would have happened if our founding fathers were as stupid as a Tea Bagger. Without being able to spend more money than they had, we would never have been able to protect ourselves from attack as a young nation. In fact, we wouldn’t even be able to protect ourselves from Hitler during the second world war if we hadn’t been able to borrow money.

Imagine what we would have done during the Republican Great Depression of the 1930s. Without being able to borrow money to get our people back to work, this great country of the USA would have gone broke. We wouldn’t have been able to start up all the jobs programs that saved us from republican stupidity.

Here we are, a century later and the Republicans are trying to destroy our country again. When will America ever learn not to listen to the Republicans?

Where Nevada’s Revenue Comes From

Where Nevada’s Revenue Comes From
David Schlecht

Here is a graph of Nevada’s Revenue stream. Check it out. While looking at it, remember that Nevada comes in dead last in almost every area that matters, from health to intelligence to poverty.

Where Nevada's Revenue Comes From

Take a look at the slice of the pie that is the largest – sales tax. Sales tax is one of the most regressive types of tax because it affects the poor and middle class the most.

So, in Nevada, we see an example of what it’s like when the rich are not expected to pay their fair share. Do you see any income tax on the wealthy? Any taxes on billion dollar bankers? Any taxes on billion dollar mines? No? Me neither.

So the rich get a free ride and the poor and middle class are saddled with everything.

Well, Nevada, how is that working for you? Does it attract business having no income tax? No, I guess not.

When will you ever learn, Nevada?

But the bigger question is what on earth are we doing trying to bring the rest of the country down to Nevada’s level by following their tax structure and giving the billionaires a free ride while expecting the poor and middle class to work for less and carry a greater portion of the cost?

When will America ever learn? It’s time to throw out the failed Republican policies. We’ve been here before, America, it was called the Great Depression and it didn’t work so well back then.

Poverty or Prosperity

Poverty or Prosperity
David Schlecht

Imagine for a moment, or maybe you don’t even need to imagine, that your employer decided that even though the business was doing good, it was time to cut your wages and improve profits. No better time to take advantage of the times than right now, when people are worried about their jobs.

So your wages have been cut and you can no longer afford to enjoy the lifestyle you’ve grown accustomed to. What do you do?

If you’re a typical American, you’ll look for better work. No one needs to put up with unethical employers. That’s right, you look to bring in more money. When would anyone say, “oh darned, I better sell my house and start living out of a cardboard box?”

No one would, except the mentally challenged.

So, when our country is dealing with insufficient funds, do we just say, “okay, it’s time to move into that third-world-country?” No! Only the mentally challenged would consider that as the first option.

So, why do we Americans ever listen to the Republican party saying that we have to start expecting less? We’ve been doing with less for over 30 years now and it’s time we started demanding more.

What happens to America if the fools get away with convincing us that we need to expect less from our country? America becomes less of a country. It’s the same thing that happens if you choose the cardboard home rather than a better job.

We can’t afford to listen to the Republican failed misconceptions any longer. If we want America to remain strong, if we want to remain a first-world country, we have to act today and say we don’t want the cardboard box.

Will we ever get back to prosperity if we keep expecting less?

Do you want to live in the best country in the world or the cheapest?

Does Supply Drive an Economy or Does Demand?

Does Supply Drive an Economy or Does Demand?
David Schlecht

We’ve discussed supply side economics many times on this blog and there are countless websites that compare the two economic models, Keynes vs Friedman. But this time I’m going to add a bit of history to the discussion. After all, if we can’t learn from our mistakes, we’re doomed to repeat them, and repeating them we are.

Supply Side Economics

Probably the best way to describe Supply Side Economics is Voodoo economics. This is the idea that if you give money to the rich, they will hire people and pay a good wage and the heavens will open and the angles will sing and leprechauns will dance. It’s also referred to as trickle-down economics.

In other words, people will run out and buy just because the stores are full.

Keynesian Economics

This is the old model of economics where demand drives the economy. In other words, when people have money they will buy.

Now this is obviously just broad strokes and there is a whole lot more involved in each of these models of economics. You may find yourself interested enough to learn economics and get into the nuts and bolts of these, but this is as technical as I plan to get.

Alright, so here’s the little bit of history I promised you. Neither of these perspectives of economics is new. Since the beginning of economic times, the concept of supply and demand has been the fundamental core of the study of economics.

However, back in the early days of America, the concept of unfettered free trade was the approach the government took and this freed up the companies to be as greedy and they could. This allowed America to become quite wealthy, or at least our wealthy became wealthy.

Of all the leading countries, we were becoming the most wealthy. This seemed to convince many people that if a little free is good, oh my gosh, totally free trade must be the be-all end-all of wealthy. So, in the late 1800s and early 1900s, America decided to pull all the plugs and let the rich get as rich as they wanted.

So by the 1920s we saw the roaring 20s when the wealthy were insane with their greed and wealth. At lease back then, they were smart enough to protect our industries through tariffs.

Then, the big crash.

Following the Great Depression, many economist admitted that the whole idea of completely unregulated greed was bad for America. At this time, Keynes came back to the idea that maybe really, demand drives the economy. This wasn’t the first time economics thought of this, but it was back in vogue.

Then, about 50 years ago, Friedman brought back the greed and supply side economics.

So, fast-forward to today and we’re all the rage back into supply-side economics and unfettered free trade. Of course, we’re also seeing the return of the economics of the Great Depression.

When will we learn from history? When we start exposing the idiots who keep pushing failed economic policies on us. When we eject the same people who got us in the First Republican Great Depression. The Republicans.

Unfettered Free Trade doesn’t work. All it does is impoverish a nation and make a handful of greedy people insanely rich.

Free trade doesn’t work.

Supply Side Economics don’t work. It’s a myth.

Voodoo Economics always brings disaster. Read your history.


Why is the Media Downplaying Madison?

Why is the Media Downplaying Madison?
Captain Jack

Why is the billion dollar corporate media downplaying the 100,000 person rally going on in Wisconsin? You would think they have a personal interest in keeping the middle class uninvolved. Maybe they’re afraid we’ll start demanding that they pay their fair share.

If this was a rally of Tea Baggers, there wouldn’t be any room in their programming to cover Japan but since it’s only the middle class…

Here is what it looks like from CNN’s coverage:

Why is CNN trying to downplay the WI rally?
Wisconsin Rally according to CNN

And this is what it actually looked like:

What the rally really looks like
The actual size of the march on Madison


What Entitlements

What Entitlements
Captain Jack

We hear in the press constantly telling us about how bad it is for people to feel entitled to government benefits. Well, that’s not really correct, we’re fed a constant supply of propaganda how entitlements for the poor and middle class are bad but the rich are entitled.

For example, we’re told our whole lives how it’s bad to be on Welfare. It’s bad to be on Unemployment Benefits, it’s bad to be sucking off the system by taking Social Security or Medicare or Medicaid.

Now we’re being told it’s bad to expect the EPA to be protecting our environment or it’s bad for the Labor Relations board to be protecting labor or how it’s bad for the FDA to be protecting us from poisonous drugs or food. We should just stop feeling so entitled.

We shouldn’t feel entitled to a free press, like NPR or PBS so let’s stop funding them and lets shut them down, we shouldn’t have people entitled to get help registering to vote, so let’s shutdown ACORN.

The list goes on endlessly. Every effort we the people put into getting benefits for our tax dollars, the billionaires put more effort into convincing us how we’re not entitled to expect anything for our tax dollars.

But, you never hear the millionaire news casters on the billion dollar news organizations telling us how they’re not entitled to the benefits they get from OUR tax dollars. You never hear the oil industry like the Koch brothers telling us how they’re not entitled to billions of dollars in tax give aways. Remember? Exxon paid noting in American taxes and even got millions of dollars back in a tax refund last year because of the welfare for the wealthy.

You never hear the billion dollar assembly line farm industry saying how they’re not entitled to billions of dollars in farm subsidies. I guess welfare for the rich is okay but we little people shouldn’t be ENTITLED to anything from our tax dollars.

The sad part is that we believe this propaganda. We’re letting them get away with stealing from us.

It’s time we got back to realizing that WE ARE ENTITLED!

We’re entitled to a decent wage. We’re entitled to unionize. We’re entitled to expect to a fair share of the profits from our labors. All our country’s profits are going to the billionaires. Welfare for the billionaires.

We’re entitled to expect our government to represent us and not the multinational corporations. We’re entitled to expect the rich to pay their fair share.

We’re entitled to expect to get some retirement money back from the Social Security we’ve been paying into our whole lives. We’re entitled to unemployment check when we’re unemployed after paying into it our whole lives. No more welfare for the wealthy.

We are entitled.

The War on Drugs


Do you have any idea how much of your tax dollars are spent on the foolish war on drugs? Billions of dollars are wasted every year.

Want to help dig this country out of the red? Legalize drugs and tax their sale. You would see billions of dollars of wasted money turn into billions of dollars of tax revenue that we can use to fix back up our country.

Let’s start with legalizing marijuana. If these wonderful benefits don’t appear we can decide to criminalize it again. It’s not beyond our ability to fix this mess we’ve created.

What are your thoughts?

[poll id=”61″]

Supply & Demand and the Cost of Health Care

Supply & Demand and the Cost of Health Care
David Schlecht

Imagine for a moment that everyone in America was college educated and everyone was a doctor. How much would it cost to go to the doctor?

Since there would be more doctors than were needed, the supply & demand would make the value of doctor services almost worthless.

In every non-American developed country, doctors make a reasonably good living but are not paid like gods. In America, supply & demand has been interfered with and there are fewer doctors than the demand. Therefore, doctors in America are prohibitively expensive.

Now, let’s imagine for a moment that America becomes a first-world country again and provided free education, all the way up to doctorates. Everyone who wanted to be a doctor and had the ability (not just the money) could be a doctor. What would happen to the cost of our medical care? That’s right, it would go way down.

So, why do you suppose America has this problem that the rest of the developed world doesn’t? What has been messing with our supply & demand?

There are two things that distort the supply & demand for medical care in America: 1) The American Medical Association and 2) America’s failure to provide free education to the gifted, not just the wealthy.

1) The American Medical Association actively limits the number of new doctors entering the field. This sort of interference with our free markets should be outlawed and people caught manipulating our markets for profit should go to jail. People are dying because our medical system is so broken and some people are making money off this broken system. Send them to jail. Murder is murder even if you don’t see the faces of the victims and their families.

2) Americans are saving a few dollars in their taxes by not providing better education for everyone but are then paying thousands of dollars more in medical expenses. Americans are smarter than that. Yet, we still hear the Tea Baggers and the Republicans say how we need to lower our taxes even further. Not too bright, now, huh?

The solution should now be quite obvious. We should join the rest of the developed world in the 21st century and extend free education through doctorate degrees. We should even include a small stipend to help students to pay their expenses while going to college. And, secondly, we should send to prison those people caught interfering with our supply of doctors.

Remember, when it comes to markets, the system of supply & demand explains a lot.

How Much Social Security Adds to the Budget

How Much Social Security Adds to the Budget – Updated

Ever wonder how much Social Security really adds to our nation’s budget?

You might not believe it but it doesn’t add a single cent. Not one red cent.

So, you must be asking yourself, well, why are the Republicans always saying we need to cut it or privatize it. The answer has nothing to do with the budget. Let me explain.

The trust fund for Social security is growing in the trillions of dollars. At first Social Security was paid as it was used. Each generation paid for it’s grandparents. But, as the baby-boomers hit the work force, it was obvious that something was necessary to have money for them when they retire as there would be fewer workers to pay for their generation.

That is why Reagan doubled the tax on the middle class. That’s another truth that you won’t find in the text books but it’s true. The Baby-boomer generation had to pay for their grandparents and for their own retirement. This doubling of your and my taxes has created a huge surplus in the Social Security trust fund. It’s over three trillion dollars today and is expected to be $4.7 trillion in ten years.

After that, the baby-boomers will be drawing down on the trust fund until they’re all gone and so is the trust fund. At that time, we can go back to each generation paying for their grandparents. In other words, we’ll go back to paying as we go.

The Republicans try to scare you by lying about how the trust fund is going broke so Social Security is going broke. It’s just a lie. Get used to them.

Our Social Security trust fund is invested in US government bonds to collect a guaranteed return. The Republicans want you to have to give that money to the bankers, you know, the ones who pay themselves billion dollar bonuses while the investments crash and burn. It doesn’t work so well for 401Ks now does it?

The Republican politicians don’t care if you starve to death after losing your privatized Social Security in the stock market, at least their big banker johns will continue to fund their elections.

Social Security is not going broke. It’s just a right-wing lie like so many others.

Update: Correction – at this date, the trust fund is just under three trillion dollars, not over.