Why the Syrian Refugee Influx Might Help Germany

About 1 million Syrian refugees have entered Germany seeking asylum.  It is estimated that this will cost the country up to $60 billion annually.  However, there may be an actual benefit to that influx.

Like most advanced nations, Germany is seeing a lowered birthrate with an ever-growing aging population. In fact, in early 2015, they became the country with the lowest birthrate in the world.  This presents a perplexing problem: How to sustain age-related social programs with fewer and fewer tax revenues from an increasingly smaller number of younger and non-retired workers?

This is where the Syrian refugees come in.  If they can be successfully integrated into the German workforce, the effects of a lowered birthrate can be offset.  In the long term,  this could change refugees from a financial burden, to the saviors of the age-related social programs that Germany is sure to face in the future.

References:

Merkel Defends Open-door Policy on Refugees: http://www.voanews.com/content/merkel-defends-open-door-pollicy-on-refugees/3100337.html

Germany becomes land with the lowest birthrate in the world: http://www.christiantoday.com/article/fast.shrinking.country.germany.becomes.land.with.the.fewest.babies.in.the.world/55008.htm

Obama's Predictions On The Sequester Never Came True

Back in February, our big-government and big-spending President predicted dire consequences if the $85.4 billion in Sequester spending cuts went into effect on March 1.  He said it would cost jobs and could harm our fragile economy.  Despite his warnings, the Sequester automatically kicked in because Congress could not come up with an alternative budget agreement.

So, the President, in order to prove how right he was, decided to make the cuts as obvious and painful to Americans as possible while completely laying the blame at the feet of the Republicans.   He shut down the White House tours.  He closed federal parks. The Blue Angels and Thunderbirds were grounded.  Even tax refund checks were delayed; and, the list goes on.

But what has really happened since sequestration?

Well, the economy has grown at the fastest pace in 2 years with Gross Domestic Product (GDP) moving from a snail's pace of 1.8% in the first quarter of 2013; to 2.5% in the 2nd quarter; then, galloped to 4.1% in the 3rd quarter.  In another measure of economic growth, Federal tax revenues hit a record high of $2.47 trillion this year; up $285 billion from the prior year.  Then, contrary to the Obama prediction, the unemployment rate fell from 7.7% in February to 7% in November.  This was the lowest rate since March of 2009.

Lastly, the very same President who condemned the Sequester spending cuts back in February, has now decided to take credit for those same spending reductions and the resulting deficit reduction.  On July 24th, in front of an adoring crowd at Knoxville College in Illinois, he proudly proclaimed: "Our deficits are falling at the fastest rate in 60 years."

You see, with Barack Obama, everything is either a shading of the truth, a half-truth, or an out-and-out lie.  The fact is that the Sequester cuts were a mere pin-prick against the massive spending levels that  he has created.  They were not going to have some enormous impact on the economy or on unemployment.  Also, the idea of the Sequester, itself, originated out of Obama's White House. No way could the Republicans be blamed for it.  And, to take credit for the reduction in the deficit is just plain hypocrisy.

You Can't Keep An Excellent Triple-A Rating By Going Deeper Into Debt

If you listen to all the arguments about raising the debt ceiling, some on the left claim that we could jeopardize our "AAA" credit rating if we don't raise the debt ceiling and, as a consequence, allow the country to default on its debt obligations. However, this is a canard, for pure political reasons, to push us to raise spending levels and not make any significant cuts to existing Federal programs.

The fact is that there are enough revenues, without raising the debt ceiling, to pay all our debts as well as support many of our current, operational obligations such as Social Security and military pay. Revenues this year will top $2.1 trillion dollars. That's about $172 billion in revenues per month while, at the same time, the interest on our debt will average about $42 billion a month; leaving $130 billion in revenue to support much of the other, essential businesses of our government. Of course, this fact does leave about $144 billion a month in other unfunded operational costs. But, we could survive, month-to-month, without default on our debt and without suffering a ratings downgrade for that very reason.

But, the real jeopardizing fact with regard to our credit rating is the amount of debt, itself. Even if we get a debt ceiling increase, the rating agencies may still lower our rating by virtue of the amount of debt that we continue to accumulate versus any real potential for revenues increases. The left would argue that simply raising taxes would solve this supposed "revenue" issue. But, as had been pointed out many times, even if you completely taxed away every penny being earned by the so-called rich, we would still fall well short of the revenues needed to make any real dent in our total debt. A debt that now sits at $14.5 trillion and rising. The only real solution is austerity through program cuts.

The real reason for the threats to downgrade America's excellent rating is that Federal spending has increased by 30% under Obama. When Bush left office, spending was at about $2.9 trillion dollars. Today, the annual Federal spending level is at $3.8 trillion; or, about $900 billion more than when Bush left. What's worse, and for all his talk of fiscal restraint, in February, Obama submitted a 10-year budget outlook whereby he would take us from the current $3.8 trillion annual spending to nearly $6 trillion in annual spending in just 10 short years. Then, through some rather generous assumptions on the economy and taxes, Obama projected that the Federal deficit would remain the same over that same 10-year period. Seen as a true fairytale, his budget submission was totally rejected by the Senate on a completely bipartisan basis; 97 to zip.

Our credit rating is in jeopardy because we can't keep raising spending levels at a rate faster than our revenues increase. In the throws of a deep recession and, subsequently, declining revenues, Obama jacked up spending by 30% in some false assumption that all that increased spending would stimulate the economy. But, the economy continues to flounder and unemployment levels continue to rise; raising the specter that revenues may continue to fall with our debt levels continuing to rise at an ever increasing rate. Our credit rating is no different than a personal credit score. If a person continues to keep spending themselves into hock, their credit score will go down; making it very difficult to borrow or obtain a loan at the best rates. And, that's exactly what will happen to the U.S. government if we continue to spend and borrow.

So, the bottom line is that we need to raise the debt ceiling in order to keep the current level of government operations running. But, in order to satisfy the rating agencies, we need to show that we, as a country, are prepared to make significant cuts in spending to reverse the massive debt accumulation. As far as raising taxes goes, this just might have to happen; but, the revenues from any tax increases should be matched at a rate twice that amount with substantial and realistic spending cuts. Only then, can we assume that we will avoid a ratings downgrade.

Why We Will All Be Paying For The Latest State Tax Hikes

I live in Las Vegas and we have no State income tax. Yet, when California raises it's taxes, I will probably pay for it too; someday. The same is true if New York raises its taxes. That's because, overall, the Federal tax revenues are being reduced with every increase in State income and sales taxes; and, eventually, the Federal government will have to make up for those losses by, somehow, taxing us all.

Under the current tax laws, you have a choice of taking the standard deduction against your income or, instead, itemizing your deductions. In most cases, small businesses or high salaried/income tax filers already itemize their deductions because they have an aggregate amount of income offsets that exceed the standard IRS deduction. As part of that itemized deduction process, you can either deduct your State income tax or your paid State sales taxes; but, not both.

So, if a State, like California or New York, raises their income tax rate by, say, 1 percent, the high salaried/income or small business residents of that State, who are able to itemize deductions on their Federal tax returns, will effectively reduce their Federally taxed income by 1 percent; and, as a result, the Federal taxes on that income would be totally lost. The same is true in States that have no income tax, like Nevada or Florida or Texas, but raise their sales taxes. Federal tax filers in those States who itemize will be able to reduce their taxable income by the effective increase in their State's sales tax rate.

In a country that increasingly depends on the so-called rich of our society to pay their taxes so that others won't have to, this is another tax law problem that will make it more difficult for Obama to pay for all his spending because it primarily affects the highest taxpayers of this country. This, too, is why I think the deficit will be greater than what the Obama Administration thinks; because, besides the loss of tax revenues from reduced business activity and lost jobs, they will be losing increased tax revenues as a result of the 10 or more States that are planning some massive tax hikes on sales and income taxes(See Full Story). That's not just my opinion but a fact!

Will The Real Deficit Number For 2009, Please Stand Up?

Throughout 2005, 2006, 2007, and early 2008, the Congress Budget Office (CBO) was always behind the curve on projecting the actual deficit by underestimating how fast it was falling as a result increasing tax revenues. The revenue increases were a direct result of the Bush tax cuts and how they stimulated business revenues and, consequently, higher taxes being paid.

Now, the CBO is projecting that the deficit for 2009 is only going to be $1.2 trillion (See Full Story). Once again, this office, one that supposedly is dedicated to budgeting, is and will be totally off base with their projections for the same reason they were wrong over the last 4 years. First, their number doesn't even include the projected stimulus packages from either the incoming Obama Administration, which is nearly 3/4ths of trillion dollars, or the Congressional plans of as high as $1.2 or $1.3 trillion. Further, it is not known at this point if the Congressional number perfectly mates with the Obama number. Logic would say that the Congressional number is the Obama number plus some extras. My guess is that some part of the Obama plans aren't in the Congressional numbers. That's because they never are. As a result, if you mesh the two plans together, we could actually be looking at $1.5 trillion or higher than what is being stated.

Lastly, I suspect that the CBO is way off base on their numbers because they just don't know how to include the real impact of the recession on tax revenues. The reality of the tax revenue situation is that people who are out of work don't pay taxes and there will be a lot of people who will lose their jobs in 2009. Also, companies and small businesses who are falling into bankruptcy or operating at losses don't pay taxes either; and, there will be a lot of those in 2009. My guess is that the $1.2 trillion that the CBO is projecting is really upwards of $1.5 or $1.6 trillion dollars; and, that's "before" Obama or Congress gets their "trillions" in stimulus wishes. I think that the deficit spending for next year could easily be in excess of $2.5 trillion -- maybe even $3 trillion if Congress can't control themselves and Obama wusses-out on his veto pen. As usual, just my opinion!

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