What if the government borrowed and invested?

[bobcat]

Yikes - the idea of an "independent agency" managing the fund is just as scary to me. Talk about a corruption waiting to happen.

What's the solution?

1) Stop voting in politicians who want to ever-increase the deficit.
2) Vote for people who guarantee a balanced budget.
3) Complete transparency in how the money is spent.
4) Referendum on important spending choices.

Governments should spend within their means. They should make it clear what they are going to do, how much it will cost, and ensure the entire thing is affordable, doable, and beneficial to the citizens they represent. Both the US and UK owe too much money from living beyond their means. The US is projected to spend $921bn in interest on the deficit this year. The UK is going to spend £105bn this year.

The UK's deficit is currently £16.3bn. The US is around $1.4tr.

The only good news is, we're not Japan.

In short, we need to be more informed, have more say, and more fiscal responsibility from those elected. If anyone is going to invest in the markets, let it be the tax payers themselves.

See, this is the problem: Since the debt is increasing at a rate of around 1.5 trillion a year, and the interest on that debt is around another trillion a year, anyone running on the strategy to cut 2 1/2 trillion from programs people depend on is never, ever, ever going to get elected, and it also does nothing to pay down the existing debt. If it were that simple, it would have been done by now. The US hasn't had a balanced budget in many years. Twenty-five years ago, there was a surplus—but it wasn’t a “clean” balanced budget in the strictest sense. It’s a bit like saying your household budget is balanced because you borrowed from your retirement fund to cover your credit card bill.

Don't get me wrong, I love the concept of a balanced budget, but we are way past that. As I mentioned earlier, people vote for candidates who will give them what they want, not from what they will take away. It's just a reality that we find ourselves in. It may be time to think outside the box.

Here's another crazy or not-so-crazy proposal: Businesses are encouraged to voluntarily contribute to paying down the national debt, and the money they donate can only go for that purpose. In exchange the government (Federal, state, and local) publishes an online list (Our heroes list) showing the businesses and amounts that were donated to pay the debt. In exchange, the public is strongly encouraged to patronize those establishments. Minimal risk and who knows, it may be worth trying.

In addition, the government would need to cap spending at the current limit, and as GDP grows each year, the deficit would shrink gradually. Just a thought.

 

[JustDave]

The logic is clear, but it's unlikely we will see that in the near future. There are current discussions about potentially altering the Social Security trust fund's investment strategy beyond Treasury securities in favor of higher returns, but past proposals of that nature have been met with significant criticism.

I remember not so long ago a president was pushing to end social security so people could invest for their retirement. It had a following until the market did a major crash, and the idea was dropped like a hot potato. Well actually, it was quietly dropped without a mention.

 

[bobcat]

I remember not so long ago a president was pushing to end social security so people could invest for their retirement. It had a following until the market did a major crash, and the idea was dropped like a hot potato. Well actually, it was quietly dropped without a mention.

People do invest for their retirement, but in 401k plans, because they realize the market has it's ups and downs, but it's over the long term, it's sound. Throughout the history of the stock market, the broader market with sufficient diversification (such as the S&P 500) have always recovered. Patience pays off and panic spells loss. Under savvy leadership, a well-balanced portfolio, and a long-term plan, it can pay off quite well.
The question that many don't ask, or don't have a clear answer to is: What do I have to lose if I don't do it (Meaning, you stick your money into a savings account paying 1/2 percent interest). The only exception to an ugly ending is if you have lots of money and you can outlast inflation.

 

[againstthegrain]

No, that wasn't it.

I could not disagree with you more.

State governments are elected by the people who live in those states, people who know what they want and need. And candidates running for state offices are (usually) also citizens of those states. In any case, people prefer to vote for long-time residents of their state.

The US Republic was originally set up so that people could control their government. It's way easier to control your state government than a federal government, especially after we grew to 50 states from the original 13.

Do you think that TX should have had a flood warning system in place at the Guadeloupe River before 120+ died this month?

Do you think TX legislature should be figuring out right now how to get that system installed, instead of concerning themselves w national political issues as they are currently doing?

Heaven help us if the state of Idaho ever took control of the federal land in our state. The Idaho legislature have already interfered w many aspects of our lives where they have ZERO business, and even less expertise.

But removing the 6% sales tax on food is beyond them in a state w billions of surplus dollars in the state treasury. (Christians In Name Only)

How is CA doing w it's myriad problems?

 

[againstthegrain]

Actually the .gov does already borrow and invest. The benefits have been privatized, so although society in general benefits it doesn't go to the US Treasury.

 

[jimintoronto]

The Canadian Pension Plan Investment Board is the second largest investment group IN THE WORLD. It buys entire physical investment properties around the world, using some of the money that individual Canadians pay into the Canada Pension Plan, every pay period. Individual Canadians make payday contributions based on what they earned, which are MATCHED by the employer's contribution, each pay period throughout the year.

The Canada Pension Plan is now fully funded for the next 45 years. The Canada Pension Plan Investment Board make a 3.9 percent profit in 2024. It works for us here in Canada. JIMB>

 

[MACKTEXAS]

Threads evolve and change courses, but for awhile this thread had been going in the direction of investing for retirement, when I was doing some research (below).

Currently, 62% of Ameircans own stock per Gallup.

Comparatively, only 23.8% of Americans owned stock in 1970 per VisualCapitalist.

Most Americans who retired in the 1970s - 1980s did not run out of money during retirement. "Between 1960 and 1995, the official poverty rate of those aged 65 and above fell from 35 percent to 10 percent," per The National Bureau of Economic Research *.
[*Even though Social Security is credited in the NBER source as a major contributor for reducing retiree poverty, SS had already been in place for 40 years prior to 1975.]

"The economic well-being of elderly Americans (aged 65 or older) improved between 1976 and 2000. Overall, poverty rates fell during this period, median real income rose, and median income relative to the working-age population was relatively stable," per this SSA report from 2003.

 

[bobcat]

Threads evolve and change courses, but for awhile this thread had been going in the direction of investing for retirement, when I was doing some research (below).

Currently, 62% of Ameircans own stock per Gallup.

Comparatively, only 23.8% of Americans owned stock in 1970 per VisualCapitalist.

Most Americans who retired in the 1970s - 1980s did not run out of money during retirement. "Between 1960 and 1995, the official poverty rate of those aged 65 and above fell from 35 percent to 10 percent," per The National Bureau of Economic Research *.
[*Even though Social Security is credited in the NBER source as a major contributor for reducing retiree poverty, SS had already been in place for 40 years prior to 1975.]

"The economic well-being of elderly Americans (aged 65 or older) improved between 1976 and 2000. Overall, poverty rates fell during this period, median real income rose, and median income relative to the working-age population was relatively stable," per this SSA report from 2003.

Yes, I think about 45% of the workforce had pensions back then, while today, they are mostly a relic of the past. In addition, many had their homes paid for, since the median price was only about $12,000. The cost of medical care and medications was far more affordable then, as well as many other things (College, vehicles, movie tickets, and even childcare used to cost about .50 an hour. Today that's around $25 an hour). So while we may have more purchasing power dollar-wise, the cost of essential goods and services has far outpaced income growth.

Additionally, life was different then. Many people did their own home maintenance, oil changing, and grew their own vegetables. Life was simpler and people seemed to have more life skills. JMO.

 

[MACKTEXAS]

Yes, I think about 45% of the workforce had pensions back then, while today, they are mostly a relic of the past. In addition, many had their homes paid for, since the median price was only about $12,000. The cost of medical care and medications was far more affordable then, as well as many other things (College, vehicles, movie tickets, and even childcare used to cost about .50 an hour. Today that's around $25 an hour). So while we may have more purchasing power dollar-wise, the cost of essential goods and services has far outpaced income growth.

Additionally, life was different then. Many people did their own home maintenance, oil changing, and grew their own vegetables. Life was simpler and people seemed to have more life skills. JMO.

I get every point you made.

My wife had a pension. I did not. I only had a 401K (for 23 years).

My company initially matched my 401K contributions, then later only matched it by half. Yet, I see it this way: the initial match equates to 100% interest (tax deferred) on every dollar I saved, or 50% interest after the reduction, plus I received the additional earnings from plan investments. I could never have accomplished the end result through stashing away dollars in a private savings account. 401K plans did not exist anywhere I worked before 1990, if at all. Those people simply had to save if they had no pension.

67% of todays workers participate in a 401K and receive the same benefit opportunnities I was afforded, therefore should be in better financial shape at retirement than previous generations, whether they invest their after retirement funds into CDs or the market.

Unquestionably, the price of homes today, as you pointed out, can be a huge factor. We only paid $65K for this house in 2008, and sold our previous house, depositing the proceeds from that sale into a bank CD - so an overbearing mortgage was not an issue for us at retirement.

Soon-to-be retirees who are short-sighted and have overextended themselves by acquiring recent high dollar mortgages, and have big appetites for travel, high-end vehicles, and the like, may find they do not have the funds to last through retirement, whether they invest in the stock market or CDs. That's a consequence of poor decisions, and the need for many of them to continue working into their 70s or 80s.

 

[bobcat]

I get every point you made.

My wife had a pension. I did not. I only had a 401K (for 23 years).

My company initially matched my 401K contributions, then later only matched it by half. Yet, I see it this way: the initial match equates to 100% interest (tax deferred) on every dollar I saved, or 50% interest after the reduction, plus I received the additional earnings from plan investments. I could never have accomplished the end result through stashing away dollars in a private savings account. 401K plans did not exist anywhere I worked before 1990, if at all. Those people simply had to save if they had no pension.

67% of todays workers participate in a 401K and receive the same benefit opportunnities I was afforded, therefore should be in better financial shape at retirement than previous generations, whether they invest their after retirement funds into CDs or the market.

Unquestionably, the price of homes today, as you pointed out, can be a huge factor. We only paid $65K for this house in 2008, and sold our previous house, depositing the proceeds from that sale into a bank CD - so an overbearing mortgage was not an issue for us at retirement.

Soon-to-be retirees who are short-sighted and have overextended themselves by acquiring recent high dollar mortgages, and have big appetites for travel, high-end vehicles, and the like, may find they do not have the funds to last through retirement, whether they invest in the stock market or CDs. That's a consequence of poor decisions, and the need for many of them to continue working into their 70s or 80s.

I know it can be difficult for people to set aside money in 401k's and CD's when they are living paycheck to paycheck, but if they can start early enough, a small amount has many years to grow. You made wise decisions, and made use of the company match perks. Also, it's sounds like you got a terrific buy on your current home, so all around, you have positioned yourself very well for these retirement years.

I have seen many cases where people don't manage their money well. They buy the latest iPhone for $1,500, or they buy a new car and are saddled with large monthly payments for 5 years, and then complain because they just don't have money for investment. People make choices all the time, but there isn't always wisdom in them. Fortunately, you exercised delayed gratification to make sure you would be comfortable later in life. Well done Mack.

 

[MACKTEXAS]

I know it can be difficult for people to set aside money in 401k's and CD's when they are living paycheck to paycheck, but if they can start early enough, a small amount has many years to grow. You made wise decisions, and made use of the company match perks. Also, it's sounds like you got a terrific buy on your current home, so all around, you have positioned yourself very well for these retirement years.

I have seen many cases where people don't manage their money well. They buy the latest iPhone for $1,500, or they buy a new car and are saddled with large monthly payments for 5 years, and then complain because they just don't have money for investment. People make choices all the time, but there isn't always wisdom in them. Fortunately, you exercised delayed gratification to make sure you would be comfortable later in life. Well done Mack.

Thanks, but that was too kind. I wasn't responsible with money when I was young, so its understandable that many young are not today either. After I posted that last one, only then did it occur to me we were somewhat talking about different things. You were speaking mostly of younger savers, as you mentioned the high cost of child care, etc.

I was thinking more in terms of those in the age group 45-55 who don't have much time left to save. I was in my 40s before reality set in.

The house we bought in 2008 needed some work, is why it was low. Comparable homes are going for $250k - $300k now.

 

[Murrmurr]

Do you think that TX should have had a flood warning system in place at the Guadeloupe River before 120+ died this month?

Do you think TX legislature should be figuring out right now how to get that system installed, instead of concerning themselves w national political issues as they are currently doing?

Heaven help us if the state of Idaho ever took control of the federal land in our state. The Idaho legislature have already interfered w many aspects of our lives where they have ZERO business, and even less expertise.

But removing the 6% sales tax on food is beyond them in a state w billions of surplus dollars in the state treasury. (Christians In Name Only)

How is CA doing w it's myriad problems?

Could we skip the part where I take this test so you can just get to the point?

 

[bobcat]

Thanks, but that was too kind. I wasn't responsible with money when I was young, so its understandable that many young are not today either. After I posted that last one, only then did it occur to me we were somewhat talking about different things. You were speaking mostly of younger savers, as you mentioned the high cost of child care, etc

I was thinking more in terms of those in the age group 45-55 who don't have much time left to save. I was in my 40s before reality set in.

The house we bought in 2008 needed some work, is why it was low. Comparable homes are going for $250k - $300k now.

I think probably most aren't very responsible with money when they are young. Retirement seems so far off and many of life lessons take a while to learn. The important thing is reality did set in before it was too late. The house you bought needed work but it was available for a bargain. That was a smart move to buy it when you did.

Many want a turnkey house where the work is already done. The problem is you are financing that home improvement money for 30 years, which means, if the home needed $30,000 in improvements, you would pay over twice that much for those improvements if you bought the home with them already done and financed it at 6% for 30 years. However, if you just do the improvements as you go, the cost is just $30,000. Like you, reality didn't set in for me till my 40's.

 

[againstthegrain]

Could we skip the part where I take this test so you can just get to the point?

State and local officials failed to protect their constituents, so the locals while they "think" they know what's best for their constituents often don't do their job very well.

 

[Murrmurr]

State and local officials failed to protect their constituents, so the locals while they "think" they know what's best for their constituents often don't do their job very well.

But the majority rules, right? That's democracy.

You asked how things are going in Calif. From my perspective; priddy shiddy. And the bubbles I've colored in on all my election ballots have had extremely little impact so far. But the majority rules, and the rest of us have to live (and die) with it.

And that's true for all levels of government.

At no point did I suggest doing away with the federal gov't. You seemed to imply that I had, but maybe I misunderstood. My gripe, in line with the OP's topic, is the federal gov't's wasteful spending due to too many agencies, many of which are redundant and/or ineffective, and add layers of unnecessary bureaucracy and delays. It's so bloated, none of us can keep track, and we have only very basic knowledge about how our fed taxes are spent.

That's what happens when money rules over majority. That's a broken democracy, and that can happen in all levels of gov't. But my point throughout is that smaller governments are easier for people/voters to control. It's a much simpler matter to oust a mayor or city counselman, for example, than a president. And the ledgers are a lot smaller.