The Federal Government is a Junkie

The federal government is a junkie addicted to spending our money. George G breaks down what this means and what can be done!

May 10, 2024 | Blogs, Podcast

About the Episode

The federal government is a junkie addicted to spending our money. With new taxes on the horizon, an insolvent Social Security trust fund, and money getting printed and sent off, what does the future hold? 

George G talks about the realities of our current tax system, who’s paying taxes, how much the government is spending, and what can be done about it!

 

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George Grombacher

George Grombacher

Host

Episode Transcript

Did you see that show? painkiller? What an incredible show. It was heartbreaking, it was just a masterpiece. And again, it’s so sad, somebody is addicted, somebody is an addict. It is so sad, it is so terrible. And the person is powerless, to manage more to get through their addiction, their loved ones are powerless to do anything about it. It’s just such a terrible thing. If you’ve not seen that show, check it out. It’s about the opioid epidemic and the Sackler family that was just so well done, because it followed and traced the lives of a handful of people that became addicted to painkillers, and how those painkillers absolutely destroyed their lives. And it’s super powerful, because they have real, real people, the family members, the loved ones of people that lost their lives to it, talking about and telling stories about it, there was all all the characters. And could there’s something that that you we can each identify with or take away, there was a character who was he ran an auto body shop, he’s a mechanic, and art his back, he got hooked on painkillers, and we just saw this sad, sad experience and this guy spiraling down. And the thing about an addict is that they will do anything, they will literally do anything. To get the thing that they’re addicted to, to get their fix, to get more. They will cheat, lie, steal, hurt people, they will do anything, they will break the law doesn’t matter. They will go through anything. To get more. The federal government, our federal government is an addict, our federal government is a junky federal government is a junkie that is addicted to spending. I don’t think that there’s any other way to put it. And so much going on in the world, and so many things that we are constantly looking around and paying attention to and giving our time and our attention to and say, Oh, look over there, look over there, oh, my gosh, look over here, when our spending problem has been going on for a really, really, really long time. Really, really, really long time. And I mean, it was interesting to go and do research for this episode here. Because it’s really eye opening. So I’m excited to share it with you. But you can look back to the last time the federal government balance its budget was Bill Clinton. And for many of you that was a really, really long time ago, probably don’t even remember, remember when Bill Clinton was President United States, where have him now. But he was the last president to actually balanced the budget. And if you would have given me a dozen guesses. I don’t think that I would have guessed that Bill Clinton did that. But he did. So where was all this coming from? Well, it’s been on my radar since 2018, since I started my first podcast, technically my second podcast, but I started learning about our national debts and running deficits and where all of our money was going, where is it moving around to, you know, happily and paint happily or begrudgingly paying taxes. And we all pay a lot of taxes. But I dug into it, like, seems like a problem. But nobody else seemed to think it was a problem. I talked to some really smart people that tried to talk me out of it and convince me that it wasn’t a problem. I talked to a lot of smart people that said, Yeah, this is a massive problem. So but what’s really brought things back to life are maybe recent conversations, even though we’re always talking about how security is going to be bankrupt. It’s going to be it’s going to be insolvent and what are we going to do, you know, in five years or 10 years, and these are sort of realities. And then there was this there’s this proposed tax on unrealized gains that the current administration is, is moving on with we’re moving ahead with so pretty into resting. But let’s start with Social Security. So security, there’s essentially two trust funds. One is for survivor benefits. So should you have a tragedy and you have a loved one die, you’re entitled to a very, very small amount of money in the form of a death benefit. So that’s one. And that’s important. But it’s not nearly as important as the Social Security that most of us think about and are aware of, which is we received that we pay into for all of our working years, and then when it comes time to start taking money out, that’s where the second Trust Fund comes in. So when you read about and you hear about, somebody’s gonna be insolvent. I don’t know what you think about, but I just typed it in. I typed in to my favorite search engine. And here are some of the headlines. To summon up. Congress hasn’t stolen a dime from Social Security, every cent in asset reserves is accounted for. Oh, so there’s nothing to worry about. Social security funds are running dry, don’t panic. Okay, I won’t freak out. And then the third one is no, no one is stealing from Social Security. Right. Okay. Got it. So it’s all a big nothing burger that nobody needs to worry about. Nobody needs to think about. But here’s the thing is I can see into the future. So can you, it’s right there, after years of people telling you that not a time to panic, nothing to see here. No problem. A couple of years from now the headline is going to be the time to panic is here. We’re all fucked, it’s over. But the problem is, there’ll be nothing, there just will be no, no actions to take no levers to pull, no money to move around, we’ll hit the end of the rope. It’s kinda like you and I need to worry about when, before credit cards. When you ran out of money, you stopped spending, you just stopped. At least that’s what I did. Because I didn’t have any more money. I didn’t have any credit. Do you remember that before credit cards, maybe maybe not. Today, it’s ubiquitous. So we can just keep spending as individuals, we can live paycheck to paycheck spent all the money I earn. And then just keep going, I can keep spending, I can keep consuming, keep buying more and more and more, what a time to be alive. What an awesome thing. Until we reach the end of our rope, where we’ve maxed out all of our credit cards, spent all of our money, the CO ship, bad place, bad news, I have no more financial engineering, no more moves, that I can play, I don’t have any, I don’t have a trump card to play. So that’s gonna be triggering for some people. That that is where we are. So what is really happening is, every time the federal government goes and takes money out of the Social Security Trust Fund, which they do all the time, they essentially grab the cash, and then place an IOU form of a, an IOU, this is a coupon, you’re gonna want to hang on to number from Dumb and Dumber.

Where he made all those coupons, one was for a Ferrari or something like that, he’s like, you’re gonna want to keep that one. But again, these are just IOUs. And it’s all based on the full faith and credit of the federal government, which is a junkie that is addicted to spending. So what’s going to happen with Social Security? Well, if we continue on the trajectory that we’re currently on, nothing good. We will be in financial trouble, we will be in financial peril, which we’re already there. We’re already between a rock and a hard place. Now. Now that I’ve really got you jazzed up and excited about about the future of everything. Let’s talk about the proposed tax on unrealized gains. And I think that you probably understand how a capital gain works but really quickly, I go and buy a share of of a mutual fund and exchange traded fund or a stock and that stock cost $100 So that’s that’s my basis the amount of money that I bought it for. Good news for me the stock goes $2,000 a share. Awesome, huge win for me. I still have not, since it did not sell I’ve yet to sell the stock. I don’t have any gains, I haven’t realized the gain the gain or I realize again when I sell the stock. Okay, great. So I bought it for 105 years later, I sell it at 1000. So my gain is $900. Traditionally speaking, that’s when I would pay a capital gain. So I would owe tax on $900. And the current rate tax rate on capital gains is between 1515 to 20%. Time so you owe me Let’s just say 20% on $900. Good enough. Now there’s like everything else. So many rules are on taxes and just depends, but that’s a really easy way to sort of think about it. So this proposed rule. And again, why is this a proposed rule? Why what’s going on here? Because the junkie, in this case, the federal government, is looking around for more drugs, and isn’t seeing any, like, oh, we need to figure out a new way of getting more money. Why? So we can spend more money. And since the federal government has no means of production, not yet anyway. Their only source of revenue is you and I, dear listener, the tax revenue that they take in from us. So this proposed rule would impose a 20% tax on unrealized gains. How’s that gonna work? Well, who cares? Gotta come up with the cash. You got to come up with the cash and pay the government 20%. So what are some some forms of unrealized capital gains? Well, it could be that you are an art collector, or a wine connoisseur. And you bought a Van Gogh for these are just stupid examples. You bought a Van Gogh for a million bucks couple years ago, and today, it’s worth $10 million. Okay, you haven’t sold it, you’ve not realized the game, you just have it, you own it. Now this proposed rule would impose a 20% tax on that. Well, where do I get the money for that? Do you have millions of dollars in cash sitting around? Is that what people think that people think that Elon Musk has trillions of dollars in cash just coming out of zeros like Scrooge McDuck or something like that? I don’t know. But Elon Musk is a perfect example of this. I bet he’s got so many unrealized gains in all the companies that he’s invested in. So it could be a stock, it could be a professional sports team, it could be your company. And obviously, marks not obvious there’s thresholds on this. So this isn’t going to be imposed on everybody. It’s theoretically speaking, just gonna be imposed on rich people. And the idea is that these rich people must pay their fair share, which is such a maddening term. That’s literally the term that Biden used. Gotta get these rich people to pay their fair share. What is that even? What does that even mean? I think that we just let that wash over us like, oh, yeah, he’s 1%. They’ve got to pay their fair share. They’re not paying their fair share. Okay, I got it. Do you know who actually pays the taxes? Do you know? I’d wager that 95% of people have no idea who’s paying what in taxes. But here’s how it actually works. And really, the most recent data we have on this is from 21. So a couple of years ago, 21 taxpayers filed 153 million tax returns, they reported earning more than $14 trillion in AGI adjusted gross income and paid nearly $2.2 trillion in individual income taxes. Okay, a lot of money. So we got that. We earned 14 trillion and paid 2 trillion individual income taxes. The average income tax rate that year was 14.9%. Came the top 1%. This 1% that we love talking about. They paid a average tax rate of 25.9%. That’s higher than 14.9%. In fact, it’s nearly eight times higher than the 3.3% which is paid by the bottom half of taxpayers, so 50% of American taxpayers, their rate is 3.3%. highest earners 25.9 Lowest 50% of taxpayers 3.3 came top 1% income share rose from 22 point 22.2% in 2020 to 26.3 and 2021. And its share of federal income taxes paid rose from 42.3% to 45.8%. The top 50% of all taxpayers paid 97.7% of all federal income taxes, while the bottom 50% paid the remaining 2.3%. So effectively, half of American taxpayers don’t pay any income tax. at all 100% 98% of income tax income taxes are paid by the top 50%. Okay, so lot going on, they’re not going on there. But let’s get back to federal to our federal government being a junkie, addicted to spending. Let’s look at a brief history of spending and revenue. Again, revenue is the money that we the citizens give to our federal government and that they in turn, spend on things. Got it? Okay. So in 1950, and 1950, federal tax revenue was $39.4 billion. It’s all the money that they took in. So we just casually wrote a check for that, too, and sent it somewhere. That wasn’t in the United States recently. We’ve done that dozens of times over the past couple of years. Spending that year was 42. Point 8 billion. So it turns out, we’ve always sucked at this revenue was 39. Spending was 42. That was in 1950. Let’s skip ahead. 25 years 1975 $204 billion in revenue $332 billion in spending. You see the trend here? Hey, 2021, an estimated revenue of 3.5 trillion trillion dollars. So 2021, you and I paid in to the federal government $3.5 trillion? Guess how much we spent? We would not we guess how much the government spent in 2021. But the same but 3.54566 and a half? Seven. If you said 7.4. Ding ding, ding, ding, ding, ding, ding, ding, ding, boom, you got it. Let’s go 2021 estimated revenue 3.5 trillion estimated spending $7.4 trillion cut? How do we cover that shortfall? You know, that giant number between 3.5 and 7.4, also known as twice as much? Well, there’s a government when there’s a shortfall between revenue and spending. Government typically covers that gap through borrowing. In other words, it issues Treasury securities, like bonds, notes bills, to borrow money from investors to finance its operations. So federal government issued Treasury securities, borrowed money.

Additionally, remit may also tap into other sources of financing such as drawing down cash balances. Yeah, we have a lot of cash balances or utilizing certain trust funds. Oh, like Social Security? Got it? We’re just talking about and, and we sold bonds to foreign countries. I see. I see. Wouldn’t want to just stop spending quite so much wouldn’t want to do that. That’s preposterous. What we need to do is just raise money. And we’ll do that by issuing debt. What’s the downside of that? Just free money. You know, let’s print these up. We’ll sell them to other countries. Ah, think about that is let’s pay it back to pay that debt back. It’s how it works. We have to give them all their money back. Plus, there’s interest on that money. And you know, it’s been going up lately, interest rates. I don’t know if you’ve noticed that. If you’ve noticed that things are more expensive than they were before. If you’ve noticed that the cost of buying a home and the interest on your mortgage or your car loan is way higher than it was couple years ago. Does anybody else notice that? It’s just me. Well, other thing about that is when the numbers are giant, giant, a higher interest rate, that’s a bad deal. It’s eventually going to crush us. That’s eventually just the interest on our national debt is eventually going to be one of it already is one of the largest line items in our spending. Bad news, what can be done? What can be done? Thanks, George. What can we actually do about it? Well, if we had the will, if we had the fortitude, we could institute austerity measures. What does that mean? That means we stopped spending so much fucking money. That’s what austerity means. Yeah. tighten your belt a little bit. You push back from the tailor. So flow. Has anybody noticed that our spending has gotten really out of control? deaf ears? No, nobody’s noticing that. Austerity measures are often implemented by governments facing economic challenges such as high levels of debt, budget deficits or the occasional financial crisis. Do any of these sound familiar? These measures typically involve cutting government spending, increasing taxes, or both? So I don’t know how much we’re talking about cutting government spending, we are manufacturing and inventing new ways to tax people. Which by the way, do you think it’s only going to be limited to the 1%? Or two rich people? Or do you think that eventually, our government, that’s a junkie addicted to spending is going to come looking for cash from you? And when I say looking for cash for you, I mean, more cash from you? How do you think it’s gonna play out? You take out your crystal ball? You tell me what you think. Is that crazy?

Unknown Speaker 21:34
I don’t think that it is.

george grombacher 21:37
reduce spending, increased taxes, with the aim of reducing deficits, restoring fiscal stability and promoting economic growth. Self Grace Greece did it 2010 severe austerity measures, the United UK did it. Following 2008. Spain did it. Portugal did it. Ireland did it. Italy did it. France did it. What’s next? What will they tax next? Remember, addicts will do anything, give it they want. In this case, it’s your money. What do you do? What can you and I do? I submit, we start focusing

Speaker 1 22:25
on what matters and stop focusing on what doesn’t matter.

george grombacher 22:31
Somebody is pulling the strings and causing infighting. And they’ve got us at each other’s throats. And it’s all I mean, sure there’s bad things in the world, not saying if there’s not this is I think, this is my way of sounding the alarm, saying, hey, gotta take a look at this. This is not sustainable. We are on the wrong path. If we keep doing what we’re doing, we are going to be in a world of hurt. So our government bankrupting us is what matters and it matters a lot, we need an intervention. We need to get these people the help they need. mad at them. I recognize that they’re addicts. And I want to approach it with love, and kindness, and caring. And a big part of that is if these people are in a position where they’re causing themselves and others harm, we need to change that. So we need to get him out of office. Let’s get these good, folks. Let’s get him set up in a nice rehab facility somewhere in Malibu, or on a nice farm somewhere. big yard, big fields they can run around in and they can live out the rest of their days, getting the help that they need. But we need to get them away from our government. We need to get them out of our pockets out of our finances. Because I know that you’re working hard to make sure that your house is in order and you’re squared away. Why aren’t we not demanding the same of our government? And I do not give a fuck about modern monetary theory. Don’t tell me about it. Don’t tell me about it. I don’t care about GDP or anything else. We have a spending problem. Our government is addicted to it. If you’ve not done this, go to US debt clock.org US debt clock.org And you’ll see they’ll spend time staring at the screen just kind of zoned out like holy shit. Yeah, bad news. So If you exercise personal responsibility in your life, let’s insist that the people that we elected to represent us are doing just that. Friendly Reminder. It’s never going to be anybody more interested in your financial success than you are certainly not the federal government. act accordingly.

 

 

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