2009-09-08

America's slow motion collapse

Social Security is broke. It had a $6 billion deficit in August.
SS is the mother of all systemic risks. Even the debate on this topic brings risk. It will expose an additional $7trillion unfunded liability. Another reason for holders of dollars to worry.

There is no fix to this. Raising taxes is a dead end. Age warfare is a possible social consequence. The really bad news is that no one will touch this for another year. By then it might be too late.
This is why listening to Obama, Democrats and Republicans arguing about healthcare is a waste of time. America does have one solution:
US citizens in rush for offshore tax advice
The US Internal Revenue Service said that the deal underscored the US government’s determination to clamp down on tax evasion.

A Senate committee has estimated that the parking of assets offshore costs the US $100bn in lost taxes each year.

New IRS guidelines for individuals with untaxed offshore assets were announced on March 23.

By coming forward voluntarily, many taxpayers who are not already being investigated by the IRS can cap their liability at six years of back taxes, interest and penalties – and avoid possible criminal prosecution.

Suzanne Reisman, a London-based US private client lawyer, said the IRS deadline was particularly relevant for Americans living in low-tax jurisdictions such as Asia.

Americans living in Britain and other relatively high-tax countries were less likely to owe the IRS money, although those who had neglected to file returns were urged to get their affairs in order.She estimated “tens of thousands” of Americans living abroad had inadvertently fallen foul of the rules.
Just as with the Swiss tax deal, this one off event will lead to less investment in America, more sheltering of income, and more Americans moving overseas. Once the one time collection wears off, the long-run revenue curve of the government will be permanently lowered.

Just another reason to avoid companies that rely on the U.S. consumer.

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