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What is the most significant fiscal issue facing the American people?

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AUTHOR: R Quinn on 10/19/2024

It’s ignoring connections and applying the reality of connections to strategic thinking.

Pretty heady stuff, eh?  Not really, just common sense or more realistically, cents. We are talking about what we say we want and the consequences of getting it. 

Corporate profits are much maligned by some people – greedy, too high and all that. Yet profits are what drive stock prices and whether they realize it or not most Americans depend on good performance in the stock market. Think IRA, 401k, pension funding, individual investments, dividend income – even jobs in some cases. About 62% of adult Americans own stocks directly or indirectly. 

There are repeated calls for a higher minimum wage, also for a providing a living wage. Most states already have a higher than federal minimum and living wage is highly variable. 

For example, the MIT living wage calculator shows for a family of four in Adair County, Kentucky  – 1 working adult – the living wage is $35.39 and hour or $73,611.2 per year. The actual median household income is $49,690. 

That same family in Barnstable County, Massachusetts requires $49.18 per hour or $102,294.4 a year. The actual is $94,387

It may be appealing to support a living wage for all, but think what that would do to prices and the economy, let alone how we would get there. 

Say we just start by raising the minimum wage and keep raising it. It creates a moving target that does not just affect the low wage workers, but salaries up the line as all workers will demand parity with the higher wages. It also affects the taxes employers pay on wages. In the end the MW worker is still at the bottom. 

And, it affects businesses of all sizes, the prices they must charge, their profitability and, oops, their stock price perhaps. 

Talk taxes to Americans and you will get us riled up. The fact is the U.S. is not near the highest taxed country in the world. The fact is also that we don’t pay enough taxes to fund what we spend, let alone what we want to spend. None the less, millions of Americans think they pay too much in taxes. We just don’t get the connection. 

I often hear envy expressed for the social programs of some European countries, why can’t we have that in America? We could if we also accepted their tax structures, including VATs (consumption tax) 20% and higher plus higher payroll taxes. 

Everyone knows the Brits and Canadians have “free” healthcare. If they can do it, why not the US? What is their secret?  A friend of mine in England is retired and pays no premiums and no out of pocket costs so his healthcare is “free” and he gets a bit annoyed if I say otherwise. Their secret is trading taxes for premiums and cost sharing at the point of service, hardly a secret. Too many Americans want the “free” part without the how part.

Are teachers underpaid? I can demonstrate they are not, but that is not the topic. Many people who feel teachers are underpaid fail to make the connection with their property taxes, the primary funding method for education – a regressive method as well. Check your property tax bill and you likely find the majority is for schools and of that more than 50% is staff pay and benefits. Raise the pay of teachers, but don’t complain about your tax bill. 

I hear calls for higher Social Security benefits, higher COLAs even – both as the trust reserve is being depleted. Before we add to the liability shouldn’t we make the trust solvent and sustainable? Shouldn’t we consider paying for what we want? 

Tariffs are a hot topic these days. No matter how you slice it, tariffs affect prices, they may affect supplies, and inflation, and in the extreme may affect jobs. The US is connected to the world. Even as tariffs may generate federal revenue, that is nominally connected to the impact on people. Do we ignore the likely retaliation by other countries?

Who doesn’t want to support American workers? But look at the tags on what you buy- everything from clothes to furniture and appliances, how much more are you willing to pay if they were all made in America- with all workers earning a livable wage? How is Walmart able to serve its lower income customers? 

I won’t go into the pros and cons of student loan forgiveness, but there is one connection question with the concept. If we were to forgive all student loans on December 31, what happens with new students after that date? Have we, by default, made college free? Surely there is a connection before and after.

Connections, consequences, call it what you will. We need to pay attention, think it through before leap toward what appears a worthy goal or simple solution, especially those labeled “free.”

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bbbobbins
18 days ago

While a good post I don’t think ” connections” answers the exam question of what the most significant fiscal issue is.

I’d say it’s somewhere in the field of self-interest and engineered division.

And from the outside of the US the biggest single thing from a personal finance perspective seems to be the healthcare system. Anything that can bankrupt decent hard working citizens through no fault of their own and prove a nightmare to navigate/ understand at best isn’t really serving anyone except healthcare providers and insurers.

But I suspect everyone is far too far down the rabbit hole where lobbyists have set public opinion to ever come back up again.

And that’s relatively easy to solve vs the greater interconnected web of issues in the OP.

Will Schenk
18 days ago

@R_Quinn

Great post. Just one minor flaw (doesn’t change the spirit of the post but the blind spot bothers me.

For example, the MIT living wage calculator shows for a family of four in Adair County, Kentucky  – 1 working adult – the living wage is $35.39 and hour or $73,611.2 per year. The actual median household income is $49,690. “

The MIT Study is based on living wages for 4 people.

The MEDIAN income is $49,690

Is the media household size 4? No, it is not. A quick google search showed me it is 2.51.

What should the living wage for 2.5 be….. you could argue 2.5 / 4 * $73,611.20 = $46,690. you actually have $3k left over.

That is very likely to simplistic. There are economies of scale with a home. You essentially buy the same heat, use almost the same electricity, pay the same property taxes, and maybe even the same mortgage amount. So it would likely fall somewhere in the middle….but still, maybe not as drastic of a shortage as the two figures above in the original post. Still any shortage is not good. Just being nit picky here.

Rick Connor
18 days ago
Reply to  Will Schenk

The calculator shows $31.14 for 2 adults and 1 child. this is about 88% of the 2 child amount ($31.14 / $35.39) . Here’s the link.

Mike Xavier
19 days ago

Great discussion for consideration. I just about agree with the way you have laid things out. The one point if make is regarding student loans…that’s a problem created and passed off to the American tax payer because banks and colleges found loopholes in the name that everyone needs a degree whuch leads to insane profits. I think borrowers should be accountable for the amount the borrowed + a certain premium for the lending institution. I think the banks should eat some of this mess as in many ways I feel they took advantage of the system and left the borrowers holding the bag.

stelea99
18 days ago
Reply to  Mike Xavier

Currently, if you have student loans you are generally excluded from bankruptcy court. Changing this would resolve the issue in my mind. Lenders would become more responsible in looking at future income from a given education plan vs. the cost of the plan. Fewer stupid loans would be made. Borrowers would be able to escape a lifetime of financial poverty via the court when it agreed that their loans were not repayable.

Dan Smith
18 days ago
Reply to  Mike Xavier

I agree Mike. There is more to this issue than meets the eye. Very well said Mike.

G W
19 days ago

Food for thought: https://usafacts.org/articles/how-many-people-receive-government-assistance/?utm_source=referral&utm_medium=rss

Which of these programs, if any, would you like to cut?

Likewise:
What other country would you prefer to live in if you are dissatisfied with the state of affairs in the U.S.A.? For me, I’m thankful to be a citizen of this great country. Can we do better? I’d sure like to think so. Will “it” happen? I believe the comments herein identify many of the barriers holding us back.

The frustrating aspect here is that, while this discussion is interesting, it’s simply all talk. Reminds me of the line frequently heard in movies when an incident occurs and an actor shouts out, “Somebody do something!” Interestingly, we are all, “somebody”.

stelea99
19 days ago

If we can confine the discussion to issues facing the readers of HD, the most significant issue facing us all is complexity. If you carefully read the topics on this forum and the responses, there isn’t any other reasonable answer. Nothing is simple, and many of the topics are inter-related. AND, every time we think we have things in hand, the folks at Sodom on the Potomac change something again. Then, add the issue of technology to that of financial complexity and you have a witch’s brew that no one really wants to drink. I mean, c’mon who really uses all those features on their smart phone. Yesterday we received a letter from some entity we never dealt with directly telling us that my wife’s health and personal info had been grabbed by some tech blackmailer. We have no way to evaluate this as we don’t know which provider or health insurance might have been involved.

One of the impacts of all this complexity is that many people who don’t have either the smarts or the desire to understand issues or are too lazy to do the work, take the path of least resistance and believe in whatever nonsense they read on the Internet.

I will offer just one example. Forgive me that some might think this is political and not directly financial, but I am not advocating a point of view.

We all know that our Southern border is an issue. Did you know that anyone from another country can appear at our border and claim asylum. Anyone who crosses the border illegally when arrested by the CBP can claim asylum. Once this claim is made, they must be admitted. This is the law in the US. Once admitted the CBP has a period of time to make an evaluation as to whether or not the claim is valid. I believe that over 95% of the time these claims are deemed invalid. The immigrant can then appeal. Currently more than 5 million cases are on appeal. There are only 900 special judges to deal with this case load. While folks are awaiting adjudication, they are given a SS card and can work. And, every time any president tries to go around the law, the court reopens the door. Yet, when you hear all the dialogue about the border, you never hear about the problem of asylum……To fix this Congress must change the asylum law. No president can change this without a change in the law. Asylum seekers are NOT illegal immigrants until legally denied asylum.

https://www.uscis.gov/humanitarian/refugees-and-asylum/asylum

Mike Gaynes
19 days ago
Reply to  stelea99

One key item you have left unmentioned, stelea99, is that Congress doesn’t WANT to change the asylum law to “fix this” because key sections of the US economy depend on immigrant labor that most folks would call illegal or undocumented (even though you correctly point out that they are frequently neither).

Nearly half of all US farm laborers and meat and dairy plant workers are undocumented. We as consumers scream about food prices, but watch what will happen to those prices if labor costs skyrocket and smaller farms simply go under because there is nobody to pick the fresh fruits and vegetables or process the chicken parts. These are tough, unpleasant jobs that native-born Americans don’t want.

We all know about the housing shortage in this country, but what’s little publicized is the difficulty homebuilders have in finding qualified labor. There are nearly half a million construction jobs open nationwide, and if builders lose another 13% of their workforce (the federal estimate of “illegal” workers on construction sites, although developers privately estimate it far higher), they won’t have enough hands to build the homes we need, because again these are jobs they can’t fill with US citizens.

Hotels, restaurants, landscapers, clothing makers and dry cleaners also depend to a varying extent on undocumented workers.

That’s why Congress doesn’t act — because it could wreck big chunks of their home-state economy, and they know it.

Last edited 19 days ago by Mike Gaynes
stelea99
19 days ago
Reply to  Mike Gaynes

I agree completely. The point I was making was about complexity and not dealing with reality….not immigration per se. Immigration is just one of many complex issues that gets only simplistic dialogue about a wall or “illegals”.

Nick Politakis
19 days ago

excellent piece which raises a lot of questions but to answer the question of the piece, I would say it’s our ever growing debt which will lead us to a fiscal crisis that could take down not only the US economy but the world economy if not handled properly.

Dan Smith
19 days ago

The most significant fiscal issue facing the American people is me. I’m the reason politicians can’t tell the truth. Seriously, I want social security fixed, but if you tell me my retirement age needs to be increased, or I have to pay more tax, or get a lower benefit, I’m not going to vote for you. If you tell me the temporary stimulus tax cut going to end, I’m not going to vote for you.
I could nitpick at Quinn’s post, but he’s correct that we don’t connect the dots. Any politician that tries to connect them for us, by being honest with us, is going to crash and burn.
Everybody knows that when they walk into a store, and see something they want, they are going to have to pay for it. Somehow the dots don’t connect when it comes to politics.
A chicken in every pot, as long as it’s free.

Dan Smith
19 days ago
Reply to  R Quinn

Agreed. Before I respond to a topic, I try to discern the exact point the writer is trying to get across. To me, your point seemed obvious enough. The first draft of my response included apolitical examples citing Carter and GHW Bush, but I decided against it, fearing I’d set off a fresh firestorm of comments. 
Regarding personal finance, I think HDers are fiscal conservatives regardless of their political affiliations. Looking at the national debt however, I’m just not sure what the term actually means any longer.

Rick Connor
19 days ago
Reply to  Dan Smith

So, We have met the enemy, and he is us?

mytimetotravel
20 days ago
Reply to  R Quinn

I really can’t see how you think it’s non-political when you mention tax policy and trade policy and single payer healthcare etc, etc. All of the topics you raise can only be addressed by politicians, and it’s pretty clear which politicians are on which side of those issues.

My pick for the most consequential issue facing the American public would be highly political, which is why I simply agreed with OldItGuy.

OldITGuy
20 days ago
Reply to  R Quinn

I was very careful to craft my comment below to keep it apolitical. However, most of the issues you identified above (ie. student loan forgiveness, tariffs, local school funding, etc) are very politically charged topics. Conversely, I believe my comment below speaks to the root cause underlying the lack of strategic thinking displayed by those responsible for dealing with many of those issues central to your posting. That said, I apologize if you feel it wasn’t appropriate to the discussion you wanted to generate. If Jonathan can remove my comment I’m fine with that.

Jonathan Clements
Admin
20 days ago
Reply to  OldITGuy

I don’t consider your comment political. But I think this thread is at risk of spinning out of control, and I’m not sure it’s the best topic to be tackling here at HumbleDollar. Perhaps a much better question for this site would be: What’s the most significant personal finance (not fiscal) issue facing Americans?

Edmund Marsh
19 days ago

Perhaps the two questions share a “connection,” such as failing to recognize the consequences of short-term decisions on long -term goals.

OldITGuy
20 days ago

You asked what’s our most significant issue facing the American people. I don’t know what’s “the most significant issue”, but one I’d like to nominate is our diminished ability in our political system to civilly and objectively discuss the issues and make reasonable compromises in order to progress forward in resolving them. Until we decide to fix that, it’s going to be very difficult to address many of the challenges coming our way. Said another way, I think improvements in this area will result in more strategic thinking and more effective plans.

mytimetotravel
20 days ago
Reply to  OldITGuy

Too much posturing for the cameras and not enough actual legislating.

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