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Federal dollars at stake in the Valley



Published: Sun, November 18, 2012 @ 12:01 a.m.

RELATED: US legislators for Valley hope for deal

SEE ALSO: Anti-tax pledge author Norquist: Romney failed to connect

By BURTON SPEAKMAN and JAMISON COCKLIN | news@vindy.com

YOUNGSTOWN

Lawmakers return to Washington this week to embark on what could be a lengthy battle to avert deep spending cuts and steep tax increases set to take the country over a fiscal cliff if left unresolved by year’s end.

If they fail to act, a broad ripple effect could be felt across the Mahoning Valley and in cities and towns across the United States, with everything from health care to education to safety nets such as unemployment benefits on the line.

“If we fall off the cliff, if no deal is reached by January, the first thing that will be hit is consumer pocket books. There will be a reduction in spending in all areas, and it will be no different in Youngstown,” said Mekael Teshome, an economist at PNC Financial Services.

“Right now, we’re in this awkward position because we don’t know what a deal will look like in the end, with no definite answer. It’s just this kind of limbo.”

For the Valley, limbo puts $10 billion on the line.

According to the U.S. Bureau of Economic Analysis, in 2009, the latest year for which data is available, Mahoning, Trumbull and Columbiana counties received more than $5.2 billion in direct federal expenditures to finance grants, loans, infrastructure improvements and to help pay thousands of federal employees at government agencies or those working to fulfill defense procurement contracts in area manufacturing.

In that same year, about 30 percent of the population in the three counties depended on some level of federal assistance, whether through entitlement programs, unemployment benefits, job training assistance or other government aid worth more than $5 billion, according to figures from the U.S. Bureau of Economic Analysis.

The cliff — and the negotiations that are bound to find lawmakers wrangling over the spending programs and tax revenue that keep federal money coming here — means much is at stake for the Valley.

THE BEGINNING

In 2011, Republicans would not raise the debt ceiling without a broad agreement to cut the country’s deficit. That impasse led to the automatic spending cuts that loom on Jan. 1, the same time the Bush-era tax cuts are set to expire.

Between budget cuts and tax increases, more than $500 billion could be sucked out of the economy between January and September, with about four-fifths of that total coming from tax hikes and $65 billion more in domestic spending cuts slated to take effect at the same time, according to the nonpartisan Congressional Budget Office.

Though not immediately pressing, intertwined in the makings of any deal will be the need to raise the government’s debt ceiling, fast approaching its $16.4 trillion limit. Eventually, lawmakers will be called on to pass a comprehensive federal budget, a feat left unfulfilled since 2009.

Paul Sracic, chairman of Youngstown State University’s political science department, says both sides of the aisle will undoubtedly use the staples of next year’s Congress as a pivot in the lame-duck session’s fiscal- cliff negotiations.

Both Democrats and Republicans have shown willingness to negotiate after the Nov. 6 election, but each has stances from which they’re unwilling to budge.

POTENTIAL IMPACT

In any event, a report by the CBO made clear that if automatic spending cuts were enacted and all Bush-era tax cuts were allowed to expire, October’s unemployment rate of 7.9 percent could spike to 9.1 percent and the Gross Domestic Product could sharply contract, sending the economy back into recession.

Congress shouldn’t focus on creating a “grand compromise,” said Alison Fraser, director of economic policy for the Heritage Institute, a conservative think tank in Washington, D.C. “The focus should be on preventing all tax increases,” she said. “It’s lunacy to raise taxes when unemployment is high and growth is low.”

It is “critically important” to keep tax cuts for the middle class, which serves as an economic catalyst by accounting for 70 percent of consumer spending, said Wendy Patton, senior project director of Policy Matters Ohio.

“Any deal needs to strike a balance between new revenue and cuts,” she said. “They need to make the tough decisions.”

CURBING GROWTH

For Bert Cene, executive director of the Mahoning Columbiana Training Association, the cliff means doing more with less. At the moment it’s the best he can hope for.

MCTA receives nearly all of its funding from the Federal Workforce Investment Act, which provides operating expenses for the One-Stop career centers and job training in Mahoning and Columbiana counties.

Based on early estimates, Cene believes if lawmakers fail to act, funding for the unemployed, displaced workers, and lower income job seekers that MCTA serves will be slashed by 8 to 10 percent nationally.

“The government sends displaced and unemployed workers to us and asks that we provide them with better skills to get the jobs that they need, but it’s an unfunded mandate,” he said. “We’ve already taken serious cuts in the last few years with this Congress, and

there really won’t be too many options left if we lose any more funding. I’m running out of magic tricks.”

Any potential spending cuts mean MCTA will be faced with a choice of either scaling back its services or turning away the unemployed altogether.

Eric Planey, vice president of international business attraction at the Youngstown/Warren Regional Chamber, shared Cene’s sentiment and said the spending cuts and tax increases would completely curb economic growth.

The local auto and aerospace industries would be impacted, Planey said. Both would see sales and business decline because supply would be curtailed.

“There’s been a lot of positive movement in those industries, but that would take a hit,” he said.

Teshome said cuts in defense spending could also hurt the Valley’s manufacturing base and sting Ohio even more. The state deals heavily in defense procurement contracts, and if defense spending is reduced, contractors stand to lose.

Oil and gas could also be affected because a shrinking GDP would lower prices, Planey said. A drop in price would slow exploration and development in the Valley.

ECONOMIC PACEMAKERS

Aside from the immediate economic impact, thornier issues remain. Long-term spending and taxation problems will make their way into the fray as well.

Treasurers at school districts all over the area are concerned about the impact of cuts associated with the fiscal cliff. Grant funding for school districts comes directly from the federal government, said Ron Iarussi, superintendent of the Mahoning County Educational Service Center. The funding is through Title 1 and Title 6 and includes funding for children with disabilities.

“Those cuts would be substantial for local districts,” he said.

All schools in the area receive title funds, Iarussi said. Some of the funding goes toward students with deficiencies in reading and math.

“Those problems tend to correspond with economics,” he said. “Schools such as Youngstown, Struthers and Campbell will lose the most.”

The U.S. Department of Education is anticipating a loss of more than $75 million for Ohio’s 2013 education funding, a decrease of

5.8 percent. Springfield Local Schools alone receive about $560,000 per year in federal money, said Edward Sobnosky, district treasurer. At the national level, the picture is no different, with school districts projected to lose $2.7 billion in the next 10 years.

“I don’t think a lot of districts understand [Title 1 and Title 6 funding] is part of the fiscal cliff,” he said. “For some districts, [that represents] 15 percent of their funding.”

CUTS IN ENTITLEMENTS

Entitlement programs will get a closer look, too. As part of the automatic spending cuts agreed to in 2011, hospitals and private practices could take a steep cut in Medicare reimbursements.

“This is already affecting patients because doctors already have to limit the number of patients they take on,” said Karyn Frederick, executive director of the Mahoning County Medical Society.

“Rates are already antiquated, and this will ultimately affect health care in the Valley. People are wary.”

Democrats are seeking to combine spending cuts with revenue generated from letting the Bush-era tax cuts expire on wealthier households earning more than $250,000 per year, while Republicans remain opposed to hiking taxes and instead want to close loopholes and limit deductions to raise revenue.

This makes a good deal look something like one that combines a compromise between adjusting tax increases and spending cuts, Sracic said.

Teshome predicts that the payroll tax cut, first enacted in 2010 to provide consumers with more spending power and emergency unemployment benefits, will likely be done away with.

The payroll tax cut hit the Social Security trust fund by reducing the 6.2 percent collection rate to 4.2 percent, effectively saving $1,000 for those earning about $50,000 per year.

“A good deal is one that gets enough votes to get something done,” Sracic said. “We can’t have payroll taxes going up or all tax brackets going up. You can’t have something like $600 billion being sucked out of the economy — it’s too weak — so you’re going to see some things adjusted and some things get kicked down the road.”

A POINT OF NO RETURN

With the political reality, experts are beginning to speculate on whether Congress will buy time by simply agreeing to disagree — pushing back spending cuts and tax hikes or allowing them to slowly phase in through 2013, as originally planned, until a “grand compromise” can be reached sometime next year.

But inaction, pundits say, is action enough. Fears over the U.S. once again seeing its credit rating downgraded, combined with skittish investors, could send financial markets into a spiral and curb capital investments — further fueling economic decline.

“We do think odds are higher now for increased volatility until the fiscal cliff and ongoing European Union issues are resolved or seriously addressed,” said Rob Gardner, a financial adviser at the Bennett/Gardner Group in Canfield. “[There’s] the fear of yet another bear market and stock prices possibly dropping between 30 and 40 percent.”

On the other hand, some like Patton, contend the cliff is more of a slope.

“It’s more important to get the right deal than to get a deal done by Jan. 1,” she said.

Fraser, of the Heritage Institute, agreed the right deal is more important than something that is rushed through but argued the damage of going over the cliff on Jan. 2 could be severe.

“They need to take steps to make sure the agreement is pro-growth,” she said of lawmakers.

For example, the Women, Infants and Children program, which provides financial support to low-income mothers, is scheduled to lose $308 million without action.

At PNC Financial Services, Teshome said the bank still believes lawmakers will reach a compromise that keeps the economy growing in 2013, a belief widely held by policy makers and experts across the country.

“It’s an unusual situation, when we’re beginning to reach that point of no return,” Sracic said. “Normally, when Congress doesn’t act, nothing happens. In this case, if Congress doesn’t act, horrible things happen and there’s some disagreement at the moment as to when we reach that point of no return. Is it now or later?”


Comments

1IslandMike(757 comments)posted 2 years ago

Congress is going to take action simply because we're two years away from the mid term elections. They are NOT going to act for any reason other than to get re-elected.

HILLARY 2016!!!

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2UticaShale(854 comments)posted 2 years ago

Time to cut up the credit card.

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3blutarsky(25 comments)posted 2 years ago

who knows if that neo-com run congress will act. them and their fiscal responsibility makes us liberals sick. when the dems get total control again we will raise that dumb ceiling and spend! HILLARY 2016!!!

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4chuck_carney(499 comments)posted 2 years ago

Blutarsky, Senator Reid runs the Democratic controlled Senate which refused to pass a budget for the past 3 years.

Democrats control the Senate and the presidency. It's time to negotiate and persuade moderate republicans to get behind a plan.

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5ytownsteelman(631 comments)posted 2 years ago

There are thousands of little programs such as the MCTA suckling off the Federal pig. We cannot afford all of these programs and agencies any longer.

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6realpeabody(1 comment)posted 2 years ago

"who knows if that neo-com run congress will act. "... I am sure you realize that Congress is made up of the House of Representatives and the Senate and that neither party controls Congress... right? Ignorance is bliss.

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7andersonathan(669 comments)posted 2 years ago

Actually for 2 years the Democrats controlled all three branches and left America with Obama Care, but failed to even bring a budget to the table or one that received votes.

And the impact of Obama Care will be starting very soon no matter what anyone does. So I say you voted for him let the Prez fix it. But in the mean time stock up on food gas and Twinkies. because it is going to hit the fan.

By 2016 this country just might be to far gone.

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8NoBS(1982 comments)posted 2 years ago

THROW ALL THE BUMS OUT!!! Congress needs to be all given their walking papers, and let's have people in there who will actually get along and do something!

It's not a (R) or a (D) problem - it's a Congress problem! Career politicians need to go the way of the dodo bird!

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9uselesseater(229 comments)posted 2 years ago

Mahoning, Trumbull and Columbiana counties = 30% of the population dependent on some level of federal assistance.

That is very near one-out-of-three.

It's time that States stand up for the citizens and their own rights. Kicking the thuggery from Washington, DC, out is the solution. Who is the federal government to make mandates from the citizens and demand via threats of the States? Education funding is one of the best examples of how the Federal government is draining the local coffers and stomping on state and local rights to manage their schools how they see fit.

The Federal Department of Education was a Carter era creation, 1979. For 203 years the United States existed without this bureaucracy. Since it's creation, education output and measures of basic literacy have been in a continuous free fall, while investment in basic education has ballooned.

Whine all you want about the fiscal cliff, slowing to declining GDP growth. To the average citizen GDP means nothing under an honest system of finance. Arguably, if people were buying locally from the neighbors and regional farmers, under any system inflation would be almost non existent (except where farmers engage in insurance and other investment schemas) and pass through the costs to consumers.

Things that do impact the populace, such as inflation are creations of unsound big business, big government and banking gimmicks. It is mass hording by the wealth group and an indirect tax that steals money from those already paid. Imagine inflation as someone performing an armed robbery on your pocketbook, annually.

If you look at inflation from year 1400 through 1900, there was little change in the costs of common products. People paid the same amount for things year after year. Those generating an income, saw the same predictable amount for many decades. People were mainly happy and you had to get up each morning and take care of your life necessities (heat your home, care for your homestead, tend to critters, harvest, grow and collect your foodstuffs, maintain proper community relationships, etc.

Starting around 1880, as corporations started to multiply, flourish and amass wealth inflation took off like a rocket. Workers demanded wages that never keep up with the inflation rate. Every year, repeat the theater and watch the divide grow between what the worker makes and what the company and owners make. Adjust for inflation and the gap grows to the size of the Grand Canyon.

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10redeye1(4629 comments)posted 2 years ago

If the D party wants to cut taxes on the wealthy then they must also cut welfare benefits too.. Besides when you cut taxes on the weathy they just raise their prices to compensate for their losses. As far as getting rid of congress members, that will never happen because to many people vote name recognition.only and nothing else ,Except those who vote for all candidates that their union tells them to vote for.

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11redvert(2094 comments)posted 2 years ago

No matter what we do, we must not balance the budget. That is just not the liberal way of thinking. As blutarsky says, we must spend, spend, spend.

And as comedian Ron White would say, "YOU CAN'T FIX STUPID"

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12IslandMike(757 comments)posted 2 years ago

Yes, the dems are to blame for the budget not being balanced. Obama came into office with a low unemployment rate, a bustling housing market and a budget surplus. Oops, sorry, that's what Bush walked into. Sorry, my bad!!

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13JoeFromHubbard(1090 comments)posted 2 years ago

@uselesseater :

> > amass wealth inflation < <

Please explain this terminology.

Inflation is primarily a monetary phenomenon that is often exacerbated by "demand pull" such as wage growth forced by unions which results in increased costs for the same amount of goods or services.

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14sam_carter(93 comments)posted 2 years ago

I say congress shouldnt get a paycheck until they do their job.
Whos with me?

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15rocky14(717 comments)posted 2 years ago

redvert

Your hero,Ronnie Reagan said debt doesn't mean anything.

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16Youngstown_Strong(91 comments)posted 2 years ago

The editor of this website has fallen off the Spelling & Grammar cliff. On the homepage caption of this article it says "If Congress failes to act..."

I don't think there has ever been a more appropriate time for someone on the internet to say EPIC FAIL.

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17blutarsky(25 comments)posted 2 years ago

tell them island my man mike! bush ruined this country and obama is saving it. he had to go around and apoligize to the world for americas bush accident. the usa is a 3rd rate country because of bush and his neo con america loving party. HILLARY 2016!!!!

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18IslandMike(757 comments)posted 2 years ago

The Neo-Cons speak of 'job creators' as if they're the backbone to the US economy. We saw what the employees of Hostess thought of these job creators this week when they decided a job that doesn't pay a living wage isn't worth having. They want to give tax cuts to multi-millionaires and billionaires so they can create $10 to $12 an hour jobs with no overtime and no benefits and the rest of us are supposed to bow to them. If you make $12 an hour for 40 hours a week and take NO VACATION (because you have NO BENEFITS) you will make $24,960 a year before taxes. That's if you're fortunate enough not to miss any days due to illness, bereavement etc.. Now can you righties explain to me how you can raise a family on that kind of money? Rent or mortgage, car payment, auto insurance, health insurance, gas, food, clothing, medicine, utility bills, home and auto maintenance.... The employees at Hostess were correct for telling them to shove their company up their ___. I'm sure the executives will leave with seven figure severance packages. Funny thing is that the folks at FIXED NOISE NETWORK feel they're all entitled to it. Lets give them more tax cuts!!

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19UticaShale(854 comments)posted 2 years ago

Nice smackdown Toy!

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20AnotherAverageCitizen(1175 comments)posted 2 years ago

TOY.

You had your chance to vote Obama out. YOU FAILED. All the repubs had to do was put in a Good candidate and Obama would have lost. However, the repubs FAILED to have a good candidate.

Too Blame Hostess on the union is just foolish. Hostess has been trouble for years. A company that only makes unhealthy products is going to suffer.

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21IslandMike(757 comments)posted 2 years ago

@ToyCanon,
You play with your TOY too much!

That's ASSUMING they are allowed to file bankruptcy. The courts will make that decision. The National Labor Relations Board is going to investigate to determine if the company is in violation of The National Labor Relations Act. I know your righties think that company execs are allowed to run their businesses like dictators. They did not try to negotiate and the Federal Labor Board will weigh that decision.

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22rickking123(312 comments)posted 2 years ago

Island Mike

The NLRB is a biased joke. just ask Boeing.

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23AnotherAverageCitizen(1175 comments)posted 2 years ago

Toy,
If this is the best GOP will do for 2016, then you are in trouble again.
http://now.msn.com/sarah-palin-endors...

Palin is the best thing for HILLARY in 2016

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24uselesseater(229 comments)posted 2 years ago

@JoeFromHubbard

> > amass wealth inflation < <

A bit of a jumbled mess on that one :)

As large wealth of the major industrialists (think Rockefeller, Carnegie, Morgan, etc.) was amassing the inflation factor appeared and has since then rocketed up non stop.

This wealth inflation period would be starting around the period we term the industrial revolution, which the United States experienced post Civil War (late 1860's onward).

"Inflation is primarily a monetary phenomenon that is often exacerbated by "demand pull" such as wage growth forced by unions which results in increased costs for the same amount of goods or services."

True. One part of the inflation pie is increased costs of all sorts.

The underlying problem is simple though, "Why does labor need to ask for an increased wage and increases each year, under the guise of inflation or cost of living increases?"

It's like a chicken and the egg question of which came first. Wouldn't the logic seem to indicate that cost of living increases in the following year are due to the labor pool demanding more in the prior year? Some small truth to that. Maybe larger truth in a small business with competitors.

Obviously, the management and owners like the aforementioned industrialists were destroyers of lives and crushers of men. They were paying people entirely too little and lured many from abroad and the country side into urban slums with the "jobs" daydream. The same recipe the Communist Chinese have been using in the past decade to exactly the same thing. Asking for wage increases and unionizing were an overdue necessity. Unsure why people didn't up and leave and return home, to the country, back to Europe, etc. rather than sludging along in death factories.

This is a good document that illustrates the issue with inflation and the artificialness it truly is. Note the industrial revolution span, note the Federal Reserve takeover of money in the US in 1913, note the US getting off the gold and silver backing of money (1972). The big boom here appears to be the post WW2 period, which we all attribute to economic prosperity and the creation of the middle class.
oregonstate.edu/cla/polisci/faculty-research/sahr/sumprice.pdf

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25peggygurney(402 comments)posted 2 years ago

Y'all do a lot of complaining, but have no solutions. Typical.

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26JoeFromHubbard(1090 comments)posted 2 years ago

@ uselesseater:

Thanks for the link to the sumprice.pdf.
Notice how inflation follows large governmental expenditures like the wars. Pay back debt with inflated dollars.

On December 18, 1971 the President devalued the dollar, and even though the devaluation was effective immediately, only Congress could officially change the gold value of the dollar. Early in 1972, Congress passed Public Law 92- 268, which gave formal approval to the December 1971 devaluation.

Look at the rate of inflation after that was done.

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27uselesseater(229 comments)posted 2 years ago

No doubt @JoeFromHubbard, that inflation is a major byproduct of war.

If we look at provided chart we see that post WW2, inflation has increased non stop and rather quickly. Way more than the hundred of years prior, combined.

Sound money back in tangibles that cannot easily be stolen, counterfeited or multiplied through financial schemas (stock market, derivatives, etc.) is what we should be doing.

As we see clearly inflation is a myth. Manufactured stealing by the controlling banking and industrial cartel from the wages of the workers and from the savings of those workers.

It's time for States to take back all sorts of powers and tell the federal government to butt out.

I'd rather see my taxes go to local and state taxes. At least I can point to some tangible things we all benefit from. With the federal government I cannot extend that same logic. The feds finance bizarre, unethical, wars, etc. without large agreement from the populace, without Congressional approval, etc.

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28JoeFromHubbard(1090 comments)posted 2 years ago

@ uselesseater:

> > As we see clearly inflation is a myth. < <

I wish it were so but it is very real, as I'm sure you're well aware. It's a real phenomenon that haunts all of us, individuals as well as corporations.

One way to counteract it is by owning assets whose value rises with inflation. Common stocks are one way of accomplishing that. One needs to own a low cost, broadly diversified basket of stocks, like an index fund, with the discipline to not sell out if the value falls temporarily, as it will with regularity.

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29uselesseater(229 comments)posted 2 years ago

Well, @JoeFromHubbard, inflation is realized and shown as real, but it isn't a natural economic thing. It's manipulation and greed, nothing more. It's theft.

The strategy of owning assets that rise with inflation is mandatory, where you are so lucky to have anything left to invest. Investment ability is becoming more rare with each passing year.

I spent several years as a stock trader. Investing in any of the markets, especially today is only slightly better than going to a casino. It is high risk and often conflicting the underlying fundamentals.

As the story goes, in short, one ounce of gold would have bought a nice custom made suit at the time of the Revolutionary War. Today it still will buy the same.

Same buying rationale exists with other examples, like buying homes eons ago and today - it scales uniformly with the same weight in gold.

That box of hard earned cash under the bed, well it continues to lose it's worth (how many folks do we know who do this to their own detriment?). Eventually your be using it to either burn to keep warm or to wipe at potty time.

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30JoeFromHubbard(1090 comments)posted 2 years ago

@uselesseater:

You're absolutely right about inflation being theft, and legalized at that.

And the stock markets of the past several years have not been much better than casinos either. If one needs funds during a down market they will need to preserve capital at the expense of their wants.

It takes a life time of prudent investing and living well within one's means to have anything at retirement age. Most can not discipline themselves to do that.

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31jojuggie(1409 comments)posted 2 years ago

IM & AAV, when are you guys going to get a job?

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32dturner256(29 comments)posted 1 year, 12 months ago

donate to interfaith home maintence program, they help people who really need it.

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33Voodoosdaddy(12 comments)posted 1 year, 12 months ago

"The editor of this website has fallen off the Spelling & Grammar cliff."

You're dealing with "The Vindy", the fact that he got a few words right is amazing.

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