Life in America in the Year 2020

Research into the Future Based on United States Government Projections – An Informal Thesis
by Varian Wrynn September 30, 2012

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Table of Contents
Abstract......................................................................................................................................................2 Overview....................................................................................................................................................3 1. Introduction (Human Concern & Research Issue)............................................................................3 2. Survey: State of the Art.....................................................................................................................3 3. Research Problem/Question..............................................................................................................3 4. Method...............................................................................................................................................3 5. Conclusion and Discussion...............................................................................................................3 1. Introduction (Human Concern & Research Issue).................................................................................4 2. Survey: State of the Art..........................................................................................................................4 3. Research Problem/Question...................................................................................................................4 4. Method...................................................................................................................................................5 (a) System Description.....................................................................................................................5 Baseline Budget...........................................................................................................................5 Inputs To The Budget's Projections.............................................................................................6 (b) Study/Test: Description...............................................................................................................9 (c) Study/Test: Results....................................................................................................................11 (d) Study/Test: Analysis & Evaluation...........................................................................................12 5. Conclusion and Discussion..................................................................................................................17 Appendix A – References.........................................................................................................................19

Abstract
By using U.S. Government statistics and 10 year projections, research was conducted to investigate how increased taxation, inflation, healthcare reform and the housing bubble burst will affect the American family standard of living by the year 2020. All substantive references are either from credible news sources or from the U.S. Government. The projections show that by 2020, the average American family will be insolvent, living from paycheck-topaycheck with virtually no discretionary spending, and likely declaring bankruptcy shortly thereafter. Note: This is a revision of the paper released on September 26, 2012 and includes the UN Food Cost model and the effects of Taxgeddon. It also expands the discussion on the mathematical model used.

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Overview
Roughly, the thesis model described here has the following elements, structure, and organization.

1. Introduction (Human Concern & Research Issue)
This section introduces the need for this research.

2. Survey: State of the Art
This section discusses the state of the art, which in this case, is born of a neurological difference between the conservative brain and the liberal brain.

3. Research Problem/Question
This section covers the research question. For the purpose of this study, the hypothesis is: The typical American's balance sheet (income and expenses) will remain approximately the same (± 5% of today's values).

4. Method
This section covers the research method in detail. It includes the following: (a) System Description; (b) Study/Test: Description; (c) Study/Test: Results; and (d) Study/Test: Analysis and Evaluation.

5. Conclusion and Discussion
This is a discussion of what the results seem to mean in the larger context and includes next steps that are evident as a result of the work.

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1. Introduction (Human Concern & Research Issue)
What will life in America be like in 2020? As of this writing, there is much controversy and fear about the future of the United States. People seem to be polarized into two camps: • • Continued government spending will bankrupt the country resulting in riots and chaos; and There is nothing to worry about.

Conservative web sites attempt to promote a sense of urgency and fear of the future should government operations continue on the same path they have been for the last several years. This may be needlessly instilling a sense of fear when fear is unwarranted. Recent research indicate a neurological difference between conservatives and liberals [Lupkin, 2012], which explains why liberals seem to accept change, and conservatives fear it. This study seeks to cut through the conservative's fear and the hype to ascertain what life will be like in the near future.

2. Survey: State of the Art
This study focuses on available literature to answer the Research Problem/Question. Numerous conservative/right-wing publications were examined with many of them promoting a collapse of the system “soon.” Soon is a highly subjective term. Merriam-Webster defines “soon” as “without undue time lapse” [Merriam-Webster, 2012] and Urban Dictionary puts “soon” at 1-24 months [Urban Dictionary, 2012]. Financial collapse also has many different meanings, ranging from a freeze in credit to the total cessation of commerce. Investopedia defines “economic collapse” as: A complete breakdown of a national, regional or territorial economy. An economic collapse is essentially a severe version of an economic depression, where an economy is in complete distress for months, years or possibly even decades. A total economic collapse is characterized by economic depression, civil unrest and highly increased poverty levels. Hyperinflation, stagflation and financial-market crashes can all be causes. Government intervention is usually necessary to bring an economy back from collapse, but can often be slow to remedy the problem. [Investopedia, 2012] Clearly, the United States has not suffered an economic collapse since the 1930's, but many conservatives feel a repeat of the Great Depression is coming “soon.” It may seem incredible that the United States will suffer an economic collapse soon – as in the next 1-24 months.

3. Research Problem/Question
Based on available publications, the author will describe the typical American's household budget for the year 2020. This year was chosen as a survey of the available literature only goes out to 2020. For the purpose of this study, the hypothesis is:
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The typical American's balance sheet (income and expenses) in 2020 will remain approximately the same percentage (± 5%) as it was in 2010.

4. Method
The author created a mathematical model using government projections to create a “typical” household budget for the average American. The model uses the Buruea of Labor Statistics (BLS) 2010 budget [U.S. Bureau of Labor Statistics, 2011] for households and takes inputs for the budget components to make predictions on how the budget components will change over the next 8 years.

(a) System Description
A model was created using a spreadsheet with today's typical balance sheet (income and expenses), then a year-by-year projection going out to the year 2020 was created, taking into account government sources for inflation, labor participation, proposed White House budget, known tax law changes, Consumer Price Index (CPI) for the previous 10 years, and the United Nations.
Baseline Budget

The BLS 2010 budget is shown below in Table 1. Missing from this budget are the taxes paid. This information was obtained by subtracting the Average Annual Expenditures from the Income Before Taxes. The State Income Tax was derived by multiplying 0.048 times the Income Before Taxes as determined by the National Bureau of Economic Research [National Bureau of Economic Research, 2012]. SS/Medicare was derived by multiplying 0.083 times the Income Before Taxes. The Federal Income Tax was assumed to be the remainder.
2010 $62,481 $14,372 $6,187 $2,999 $5,186 $48,109 $3,624 $2,505 $16,557 $1,700 $7,677 $3,157 $2,504 $1,633 $5,373 $3,379

Income Before Taxes Taxes FITW SITW SS/Medicare Average Annual Expenditures Food - At home - Away from home Housing Apparel and services Transportation Healthcare Entertainment Cash contributions Personal insurance and pensions All other expenditures

Table 1: 2010 BLS Budget

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Inputs To The Budget's Projections

Each of the components to the budget will change at differing rates over the next several years as discussed below. Table 2 shows these input to the budget.

Table 2: BLS Budget Input Change Guidelines Income Before Taxes is assumed to increase at a rate of 3% per year [Social Security Administration, 2012]. Taxes for 2010 in this simulation have to be in inferred by taking the income before taxes and subtracting the average annual expenditures. This was confirmed as a reasonable inference as the overall tax rate was 23% and the Congressional Budget Office put the number in 2009 at 22.3% [Congressional Budget Office, 2012]. This is 3% deviation and deemed to be acceptable. SITW (State Income Tax Withholdings) is assumed to remain constant as it has remained constant from 2000 to 2010. The average changed from 4.80% to 4.85% [National Bureau of Economic Research, 2012]. A review of this data shows some states increased taxes and some lowered, so an assumption is made that they will remain constant, however, they are likely to rise. FITW (Federal Income Tax Withholdings) for 2013-2020 is determined by dividing the Income Tax Receipts from the President's past budgets and the proposed 2013 budget [Office of Management and Budget, 2012; Office of Management and Budget, 2010] by the change in population (0.8%/year) [Westcott, 2012] times the labor participation rate which is expected to decrease 0.3% per year [U.S. Bureau of Labor Statistics, 2012]. An additional factor of 0.875 was included to account for the number of people who do not pay income tax (12.5% of the working population, determined empirically to align the real revenue collected with the theoretical revenue that should be collected). The formula is as shown: FITW = Income Tax Receipts ÷ Change in Population × Labor Participation Rate × Factor The income tax receipts come from the President's proposed 2013 budget. Change in working age adults is assumed to increase by the same rate as the increase in population and provides the change in population number. The labor participation rate comes from the BLS historical database [U.S. Bureau of Labor Statistics, 2012] and used to make future projections. SS/Medicare will cease the 2011-2012 holiday resulting in a step increase in 2013 from 4.3% of gross income to 6.3% of gross income, and then increase similarly to FITW as calculated above as the White
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House Proposed 2013 Budget calls for this increase. CPI is assumed to increase at the rate of 2.83% per year based on a simple interest calculation from the Bureau of Labor Statistics CPI data [U.S. Bureau of Labor Statistics, 2012]. The index in 2000 was 168.8; the index in 2010 was 216.87; the change over 10 years was 47.887, divided by 168.8 yields 0.283 for 10 years, or 2.83% per year. Conservative media fears of hyper-inflation due to quantitative easing are dismissed due to a lack of historical data on this monetary policy. Food is projected to increase starting in 2013 and is based on United Nations Ethanol Equilibrium Curve [Foster, 2012; New England Complex Systems Institute, 2012]. These are illustrated in Figure 1 and and Chart 1, below:

Figure 1: Food prices and model simulations [New England Complex Systems Institute] To project Figure 1 into the future, each point on the equilibrium model from 2004 through 2012 was entered into a spreadsheet, then the growth function applied to forecast future changes from 2013 through 2020. The growth function determined the corn ethanol production curve increased at 9% per year. As a double-check, the percentage change from year-to-year was added in the spreadsheet to ensure the price increases were not abnormally large. The spreadsheet is shown in Table 3, below.

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Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Index 110 116 120 125 138 150 170 185 205 223.29 241.94 260.04 282.73 306.13 327.38 357.64 387.07

Table 3: Projections of Price Changes Due to Corn Ethanol Production Table 3 put into graphical form is shown in Chart 1.

Chart 1: Equilibrium Model extended to 2020

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Housing is assumed to decrease 10% per year until 2013, then rise at 4% per year [USA Today, 2012]. Healthcare costs are assumed to increase 7% per year over the 10 years [Social Security Advisory Board, 2009] with an additional $1200 increase for ObamaCare in 2014 [Kyl, 2012].

(b) Study/Test: Description
This study addresses the fears felt by conservatives by projecting the typical American household's finances in the year 2020. 2020 – just eight years away – is clearly outside the loosest definition of “soon” and this study presumes whatever imbalance in the economy that “will occur soon” that can be detected today using publicly available credible information will have occurred between now and 2020. The following table was generated using the information from 4(a) showing the changes in the components of the BLS budget:
Income Before Taxes Taxes * FITW SITW SS/Medicare Average Annual Expenditures Food - At home *** - Away from home *** Housing ǂ Apparel and services ** Transportation ** Healthcare ǂǂ Entertainment ** Cash contributions ** Personal insurance and pensions ** All other expenditures ** Deficit ǂǂǂ Accumulated Debt Taxes as a percentage of income + 2010 2011 2012 2013 2014 2015 2016 2017 $62,481 $62,731 $63,415 $64,727 $66,087 $67,448 $68,716 $69,953 $14,372 $13,636 $14,604 $15,739 $16,546 $17,502 $18,591 $19,679 $6,187 $6,210 $6,678 $7,293 $7,790 $8,404 $9,068 $9,758 $2,999 $3,011 $3,044 $3,107 $3,172 $3,238 $3,298 $3,358 $5,186 $4,415 $4,882 $5,339 $5,584 $5,860 $6,225 $6,564 $48,109 $47,845 $47,961 $50,076 $53,462 $55,773 $58,319 $60,963 $3,624 $3,944 $4,370 $4,760 $5,158 $5,544 $6,027 $6,526 $2,505 $2,726 $3,021 $3,290 $3,565 $3,832 $4,166 $4,511 $16,557 $14,901 $13,411 $13,948 $14,506 $15,086 $15,689 $16,317 $1,700 $1,748 $1,798 $1,848 $1,901 $1,955 $2,010 $2,067 $7,677 $7,894 $8,118 $8,347 $8,584 $8,827 $9,076 $9,333 $3,157 $3,378 $3,614 $3,867 $5,338 $5,712 $6,112 $6,540 $2,504 $2,575 $2,648 $2,723 $2,800 $2,879 $2,960 $3,044 $1,633 $1,679 $1,727 $1,776 $1,826 $1,878 $1,931 $1,985 $5,373 $5,525 $5,681 $5,842 $6,008 $6,178 $6,352 $6,532 $3,379 $3,475 $3,573 $3,674 $3,778 $3,885 $3,995 $4,108 $0 $0 23.00% $1,250 $1,250 21.74% $850 $2,100 23.03% -$1,087 $1,013 24.32% -$3,921 -$2,908 25.04% 2018 $71,191 $20,763 $10,413 $3,417 $6,933 $63,605 $6,979 $4,824 $16,969 $2,125 $9,597 $6,997 $3,130 $2,041 $6,717 $4,224 2019 $72,344 $21,766 $11,023 $3,473 $7,270 $66,653 $7,624 $5,270 $17,648 $2,185 $9,869 $7,487 $3,219 $2,099 $6,907 $4,344 2020 $73,516 $22,748 $11,644 $3,529 $7,576 $69,754 $8,251 $5,704 $18,354 $2,247 $10,148 $8,011 $3,310 $2,159 $7,103 $4,467

-$5,827 -$8,194 -$10,689 -$13,177 -$16,074 -$18,985 -$8,735 -$16,929 -$27,618 -$40,795 -$56,869 -$75,855 25.95% 27.06% 28.13% 29.17% 30.09% 30.94%

* For 2010, derived by subtracting expenditures from income; for each subsequent year, derived by adding FITW, SITW, and SS/Medicare ** Assumed to increase with CPI (2.83%/year) *** Assumed to rise according to the UN Ethanol Equilibrium Curve ǂ Assumed to drop until 2013, then rise 4%/year ǂǂ Healthcare rises 7% per year, and adds $1200 in 2014 ǂǂǂ Deficit equals income - taxes - expenses + Does not include interest on the accumulated debt

Table 4: BLS Budget Projection Over Time To calculate the taxes, a temporary worksheet was created to show Income Tax Receipts from the 2013 Proposed Budget, factor in the increase in workforce to determine the average taxes paid per person. This worksheet is shown below:

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Gross Receipts (x1,000,000) FITW Receipts SS Medicare SS/Medicare People at Work (x1000) Working Population Receipts per Capita FITW (x1,000,000) SS/Medicare (x1,000,000)

2010 $1,081 $682 $196 $878 2010 152957 2010 $6,184 $5,166

2011 $1,091 $566 $188 $754 2011 153718 2011 $6,210 $4,415

2012 $1,179 $635 $203 $838 2012 154483 2012 $6,678 $4,882

2013 $1,294 $707 $214 $921 2013 155252 2013 $7,293 $5,339

2014 $1,389 $742 $226 $968 2014 156024 2014 $7,790 $5,584

2015 $1,506 $782 $239 $1,021 2015 156801 2015 $8,404 $5,860

2016 $1,633 $834 $256 $1,090 2016 157581 2016 $9,068 $6,225

2017 $1,766 $883 $272 $1,155 2017 158365 2017 $9,758 $6,564

2018 $1,894 $937 $289 $1,226 2018 159153 2018 $10,413 $6,933

2019 $2,015 $987 $305 $1,292 2019 159945 2019 $11,023 $7,270

2020 $2,139 $1,034 $319 $1,353 2020 160741 2020 $11,644 $7,576

Table 5: Worksheet Showing Per Capita Tax Liability Based on OMB 2013 Budget and Population Gross Receipts was entered directly from the Budget of the United States Government, Fiscal Year 2013 [Office of Management and Budget, 2012] and the People at Work was entered from the Civilian labor force participation rates by age, sex, race, and ethnicity [ U.S. Bureau of Labor Statistics, 2012]. The Receipts per Capita simply divides the receipts by the population and multiplies by the factor mentioned in above (0.875). This is carried out for all 11 years. The result is transferred up to Table 4 in the FITW and SS/Medicare lines. SITW is not adjusted for population growth as the US Budget does not address state income taxes. The rest of Table 5 was created as mentioned above in section 4(a) in a straight-forward fashion. Three additional lines were added to the BLS Budget: Deficit, Accumulated Debt, and Taxes as a percentage of income to illustrate the effects of the changes year-to-year. The Deficit number shows how a family that has a balanced budget in 2010 will fare over time. Accumulated Debt is the sum of the Deficit over time. Taxes as a percentage of income shows how the effective (or marginal) tax rate changes over time. Two columns were added to the right to illustrate the cash differences and the change over 10 years as a percentage. These two columns illustrate the amount and percentage change over 10 years and by comparing the numbers one can see that not all budget components change equally. If all components changed equally, there would be no problems to worry about. But this is not the case, hence the reason for this study. This is shown in Table 6.

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Income Before Taxes Taxes * FITW SITW SS/Medicare Average Annual Expenditures Food - At home *** - Away from home *** Housing ǂ Apparel and services ** Transportation ** Healthcare ǂǂ Entertainment ** Cash contributions ** Personal insurance and pensions ** All other expenditures ** Deficit ǂǂǂ Accumulated Debt Taxes as a percentage of income +

2010 2011 2012 2013 2016 $62,481 $62,731 $63,415 $64,727 $68,716 $14,372 $13,636 $14,604 $15,739 $18,591 $6,187 $6,210 $6,678 $7,293 $9,068 $2,999 $3,011 $3,044 $3,107 $3,298 $5,186 $4,415 $4,882 $5,339 $6,225 $48,109 $47,845 $47,961 $50,076 $53,216 $3,624 $3,944 $4,370 $4,760 $6,027 $2,505 $2,726 $3,021 $3,290 $4,166 $16,557 $14,901 $13,411 $13,948 $15,689 $1,700 $1,748 $1,798 $1,848 $2,010 $7,677 $7,894 $8,118 $8,347 $9,076 $3,157 $3,378 $3,614 $3,867 $6,112 $2,504 $2,575 $2,648 $2,723 $2,220 $1,633 $1,679 $1,727 $1,776 $483 $5,373 $5,525 $5,681 $5,842 $4,237 $3,379 $3,475 $3,573 $3,674 $3,196 $0 $0 23.00% $1,250 $1,250 21.74% $850 $2,100 23.03% -$1,087 $1,013 24.32%

2019 $72,344 $21,766 $11,023 $3,473 $7,270 $55,583 $7,624 $5,270 $17,648 $1,399 $9,869 $7,487 $579 $0 $3,455 $2,252

2020 $73,516 $22,748 $11,644 $3,529 $7,576 $57,073 $8,251 $5,704 $18,354 $719 $10,148 $8,011 $596 $0 $3,553 $1,737

10 Year 10 Year Change % Change $11,035 18% $8,376 58% $5,457 88% $530 18% $2,390 46% $8,964 $4,627 $3,199 $1,797 -$981 $2,471 $4,854 -$1,908 -$1,633 -$1,820 -$1,642 19% 128% 128% 11% -58% 32% 154% -76% -100% -34% -49%

-$3,092 -$5,005 -$6,305 -$5,917 -$18,685 -$24,990 27.06% 30.09% 30.94%

* For 2010, derived by subtracting expenditures from income; for each subsequent year, derived by adding FITW, SITW, and SS/Medicare ** Assumed to increase with CPI (2.83%/year) *** Assumed to rise according to the UN Ethanol Equilibrium Curve ǂ Assumed to drop until 2013, then rise 4%/year ǂǂ Healthcare rises 7% per year, and adds $1200 in 2014 ǂǂǂ Deficit equals income - taxes - expenses + Does not include interest on the accumulated debt

Table 6: BLS Budget with Select Years and Showing 10 Year Change in Values

(c) Study/Test: Results
This is the “uninterpreted” results of the study. It shows the marginal tax rate rising from 23% to 31%. Income before taxes will increase 18%, however, overall taxes will increase 58%, FITW will increase 86% and SS/Medicare will increase 46%. The data also shows almost all expenditures will increase with the CPI and be about 33% higher in 2020 than in 2010. Housing is expected to rise a meager 11%. Healthcare costs are expected to increase 154% compared to 2010 levels. When comparing the Income Before Taxes, Taxes, and Average Annual Expenditures, the average family will bring in $11,035 more, but pay $8,376 more in taxes, and have $15,792 more in expenditures. The family with a balanced budget today ($0 deficit) will be spending $13,132 more than they earn in 2020. Also note that Income Before Taxes increases 18% over the 10 years, but the CPI drives Average Annual Expenditures up 33%. The household deficit actually goes positive (indicating a surplus) peaking in 2012, diminishes in 2013, and runs increasingly negative from 2014 through 2020.

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(d) Study/Test: Analysis & Evaluation
This is an analysis and interpretation of the study/test results with real-life analogies to help the reader understand the results. This study puts the results in simple terms that the reader can apply to their own financial situation to gauge the impact to their finances. Housing is expected to rise a meager 11%, driven mainly by 10% annual losses in 2010-2012. Social Security tax was lowered 2% by President Obama for 2011 and 2012 [Internal Revenue Service, 2010] as an economic stimulus for the economy. This reduction is scheduled to end in December, 2012 and the Social Security tax will resume at its previous rate. This 2% is not reflected in the Budget of the United States Government, Fiscal Year 2013:

Figure 2: Social Security Tax Revenue 2011-2013 If this change were reflected in the above figure, the increase from 2012 to 2013 would be much greater, leading to the Fiscal Cliff referred to by many people, including politicians [Quayle, 2012]. The end result is not much different – the Accumulated debt is $2,999 less with this tax break. See Table 7 for the revised BLS Budget:
Income Before Taxes Taxes * FITW SITW SS/Medicare ++ Average Annual Expenditures Food - At home *** - Away from home *** Housing ǂ Apparel and services ** Transportation ** Healthcare ǂǂ Entertainment ** Cash contributions ** Personal insurance and pensions ** All other expenditures ** Deficit ǂǂǂ Accumulated Debt Taxes as a percentage of income + 2010 2011 2012 2013 2014 2015 2016 2017 $62,481 $62,731 $63,415 $64,727 $66,087 $67,448 $68,716 $69,953 $14,372 $12,212 $13,029 $15,739 $16,546 $17,502 $18,591 $19,679 $6,187 $6,210 $6,678 $7,293 $7,790 $8,404 $9,068 $9,758 $2,999 $3,011 $3,044 $3,107 $3,172 $3,238 $3,298 $3,358 $5,186 $2,991 $3,307 $5,339 $5,584 $5,860 $6,225 $6,564 $48,109 $47,845 $47,961 $50,076 $53,462 $55,773 $58,319 $60,963 $3,624 $3,944 $4,370 $4,760 $5,158 $5,544 $6,027 $6,526 $2,505 $2,726 $3,021 $3,290 $3,565 $3,832 $4,166 $4,511 $16,557 $14,901 $13,411 $13,948 $14,506 $15,086 $15,689 $16,317 $1,700 $1,748 $1,798 $1,848 $1,901 $1,955 $2,010 $2,067 $7,677 $7,894 $8,118 $8,347 $8,584 $8,827 $9,076 $9,333 $3,157 $3,378 $3,614 $3,867 $5,338 $5,712 $6,112 $6,540 $2,504 $2,575 $2,648 $2,723 $2,800 $2,879 $2,960 $3,044 $1,633 $1,679 $1,727 $1,776 $1,826 $1,878 $1,931 $1,985 $5,373 $5,525 $5,681 $5,842 $6,008 $6,178 $6,352 $6,532 $3,379 $3,475 $3,573 $3,674 $3,778 $3,885 $3,995 $4,108 $0 $0 23.00% $2,674 $2,674 19.47% $2,425 $5,099 20.55% -$1,087 $4,012 24.32% -$3,921 $91 25.04% 2018 $71,191 $20,763 $10,413 $3,417 $6,933 $63,605 $6,979 $4,824 $16,969 $2,125 $9,597 $6,997 $3,130 $2,041 $6,717 $4,224 2019 $72,344 $21,766 $11,023 $3,473 $7,270 $66,653 $7,624 $5,270 $17,648 $2,185 $9,869 $7,487 $3,219 $2,099 $6,907 $4,344 2020 $73,516 $22,748 $11,644 $3,529 $7,576 $69,754 $8,251 $5,704 $18,354 $2,247 $10,148 $8,011 $3,310 $2,159 $7,103 $4,467

-$5,827 -$8,194 -$10,689 -$13,177 -$16,074 -$18,985 -$5,736 -$13,930 -$24,619 -$37,796 -$53,870 -$72,856 25.95% 27.06% 28.13% 29.17% 30.09% 30.94%

* For 2010, derived by subtracting expenditures from income; for each subsequent year, derived by adding FITW, SITW, and SS/Medicare ** Assumed to increase with CPI (2.83%/year) *** Assumed to rise according to the UN Ethanol Equilibrium Curve ǂ Assumed to drop until 2013, then rise 4%/year ǂǂ Healthcare rises 7% per year, and adds $1200 in 2014 ǂǂǂ Deficit equals income - taxes - expenses + Does not include interest on the accumulated debt ++ Reflects 2% SS tax holiday for 2011 and 2012

Table 7: Revised Budget Showing 2% Social Security Tax Holiday Also, the Bush-era tax breaks scheduled to end in 2012 are not shown as a large increase as one would expect:

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Figure 3: Individual Income Tax Revenue 2011-2013 This may be an omission on the part of the Office of Management and Budget or may be an indicator that the White House expects Congress to extend the Bush-era tax cuts. It could also mean the tax cuts are not that significant. If one assumes the typical household will reduce discretionary spending to maintain a balanced budget by cutting out entertainment, charity, cash contributions and personal insurance pensions (assumed to be home/auto insurance, and IRA/401k contributions), the chart resembles Table 8.
Income Before Taxes Taxes * FITW SITW SS/Medicare ++ Average Annual Expenditures Food - At home *** - Away from home *** Housing ǂ Apparel and services ** Transportation ** Healthcare ǂǂ Entertainment ** Cash contributions ** Personal insurance and pensions ** All other expenditures ** Deficit ǂǂǂ Accumulated Debt Taxes as a percentage of income + 2010 2011 2012 2013 2014 2015 2016 2017 $62,481 $62,731 $63,415 $64,727 $66,087 $67,448 $68,716 $69,953 $14,372 $13,636 $14,604 $15,739 $16,546 $17,502 $18,591 $19,679 $6,187 $6,210 $6,678 $7,293 $7,790 $8,404 $9,068 $9,758 $2,999 $3,011 $3,044 $3,107 $3,172 $3,238 $3,298 $3,358 $5,186 $4,415 $4,882 $5,339 $5,584 $5,860 $6,225 $6,564 $48,109 $47,845 $47,961 $48,933 $49,373 $49,176 $49,815 $50,492 $3,624 $3,944 $4,370 $4,760 $5,158 $6,038 $6,565 $7,108 $2,505 $2,726 $3,021 $3,290 $3,565 $1,916 $2,083 $2,255 $16,557 $14,901 $13,411 $13,948 $14,506 $15,086 $15,689 $16,317 $1,700 $1,748 $1,798 $1,386 $1,426 $1,466 $1,507 $1,240 $7,677 $7,894 $8,118 $8,347 $8,584 $8,827 $9,076 $9,333 $3,157 $3,378 $3,614 $3,867 $5,338 $5,712 $6,112 $6,540 $2,504 $2,575 $2,648 $2,042 $2,100 $2,159 $1,665 $1,370 $1,633 $1,679 $1,727 $1,776 $913 $939 $483 $0 $5,373 $5,525 $5,681 $5,842 $4,007 $4,120 $4,237 $4,357 $3,379 $3,475 $3,573 $3,674 $3,778 $2,914 $2,397 $1,972 $0 $0 23.00% $1,250 $1,250 21.74% $850 $2,100 23.03% $55 $2,155 24.32% $168 $2,323 25.04% $770 $3,093 25.95% $310 $3,403 27.06% -$218 $3,185 28.13% 2018 $71,191 $20,763 $10,413 $3,417 $6,933 $50,284 $7,602 $2,412 $16,969 $1,275 $9,597 $6,997 $1,056 $0 $3,360 $1,014 $145 $3,330 29.17% 2019 $72,344 $21,766 $11,023 $3,473 $7,270 $50,305 $8,830 $659 $17,648 $983 $9,869 $7,487 $435 $0 $3,455 $938 $274 $3,603 30.09% 2020 $73,516 $22,748 $11,644 $3,529 $7,576 $49,593 $9,701 $178 $18,354 $506 $8,119 $8,011 $447 $0 $3,553 $724 $1,176 $4,779 30.94% 10 Year 10 Year Change % Change $11,035 18% $8,376 58% $5,457 88% $530 18% $2,390 46% $1,484 $6,077 -$2,327 $1,797 -$1,194 $442 $4,854 -$2,057 -$1,633 -$1,820 -$2,655 3% 168% -93% 11% -70% 6% 154% -82% -100% -34% -79%

* For 2010, derived by subtracting expenditures from income; for each subsequent year, derived by adding FITW, SITW, and SS/Medicare ** Assumed to increase with CPI (2.83%/year) *** Assumed to rise according to the UN Ethanol Equilibrium Curve ǂ Assumed to drop until 2013, then rise 4%/year ǂǂ Healthcare rises 7% per year, and adds $1200 in 2014 ǂǂǂ Deficit equals income - taxes - expenses + Does not include interest on the accumulated debt ++ Reflects 2% SS tax holiday for 2011 and 2012

Table 8: Revised Budget With Reductions In Discretionary Spending Note: The following scenario reflects one possibility. Cuts were made as follows: 2013: Reduced apparel and services by 25%, reduced cash contributions 25%. 2014: Reduced cash contributions 50% and personal insurance and pensions 33%. 2015: Reduced food – away from home 50% (but increased food – at home 30% of the difference between the two year's savings from eating out assuming food cost ratio of 30% for restaurant meals), and reduced all other expenditures 25%. 2016: No changes necessary. 2017: Reduced cash contributions by 100%. 2018: Reduced reduced entertainment 25%, reduced personal insurance and pensions 25%, reduced
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all other expenditures 50%. Note: Personal insurance and pensions cannot be lowered any further as auto and home insurance are in this category and equates to less than $300/month. 2019: Reduced food – away from home 75% (but increased food – at home 30% of the difference between the two year's savings from eating out assuming food cost ratio of 30% for restaurant meals), reduced apparel and services by 25%, reduced entertainment 60%, reduced all other expenditures 10%. 2020: Reduced food – away from home 75% (but increased food – at home 30% of previous year's away from home assuming food cost ratio of 30% for restaurant meals), reduced apparel and services by 50%, reduced transportation 20%, reduced all other expenditures 25%. At the end of 2020, the standard of living has dropped dramatically. People will be eating out 93% less, buying 70% less clothing and services, going out for entertainment 82% less, eliminating cash donations, reducing insurance and pension contributions 34%, and cutting all other expenditures 79%. The alternative is depleting savings, borrowing on credit and finally declaring bankruptcy. One must ask, how many years of personal austerity will the average family endure before giving up and exchanging their credit rating for financial relief. Once expenditures exceed income and liquid assets, the family is insolvent [Merriam-Webster, 2012]. Note: Personal loans are covered under all other expenditures, which was reduced dramatically in 2020, indicating the possibility that most average families will declare bankruptcy en masse by 2020, and they will still live paycheck-to-paycheck with no savings accumulation. This will be extraordinarily painful for the average American as the last time society experienced this type of financial hardship was in the Great depression of the 1930's. Few people alive today managed household budgets during those times, leaving the current generation unprepared for what is projected to come. Now consider the Tax Armageddon, or Taxageddon as it is being called, where the Bush-era tax breaks expire, and the Social Security 2011-2012 holiday expires. Beginning January 1, 2013, taxes are expected to take a step increase of 34% [The Heritage Foundation, 2012]. Factoring in this development, which appears to be missing from the 2013 Proposed Budget, produces the following budget over time:

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Income Before Taxes Taxes * FITW +++ SITW SS/Medicare ++ Average Annual Expenditures Food - At home *** - Away from home *** Housing ǂ Apparel and services ** Transportation ** Healthcare ǂǂ Entertainment ** Cash contributions ** Personal insurance and pensions ** All other expenditures ** Deficit ǂǂǂ Accumulated Savings/Debt Taxes as a percentage of income +

2010 2011 2012 2013 2014 2015 2016 2017 $62,481 $62,731 $63,415 $64,727 $66,087 $67,448 $68,716 $69,953 $14,372 $13,636 $14,604 $17,827 $18,682 $19,628 $20,707 $21,784 $6,187 $6,210 $6,678 $9,381 $9,926 $10,530 $11,183 $11,863 $2,999 $3,011 $3,044 $3,107 $3,172 $3,238 $3,298 $3,358 $5,186 $4,415 $4,882 $5,339 $5,584 $5,860 $6,225 $6,564 $48,109 $47,845 $47,961 $50,076 $53,462 $55,773 $58,319 $60,963 $3,624 $3,944 $4,370 $4,760 $5,158 $5,544 $6,027 $6,526 $2,505 $2,726 $3,021 $3,290 $3,565 $3,832 $4,166 $4,511 $16,557 $14,901 $13,411 $13,948 $14,506 $15,086 $15,689 $16,317 $1,700 $1,748 $1,798 $1,848 $1,901 $1,955 $2,010 $2,067 $7,677 $7,894 $8,118 $8,347 $8,584 $8,827 $9,076 $9,333 $3,157 $3,378 $3,614 $3,867 $5,338 $5,712 $6,112 $6,540 $2,504 $2,575 $2,648 $2,723 $2,800 $2,879 $2,960 $3,044 $1,633 $1,679 $1,727 $1,776 $1,826 $1,878 $1,931 $1,985 $5,373 $5,525 $5,681 $5,842 $6,008 $6,178 $6,352 $6,532 $3,379 $3,475 $3,573 $3,674 $3,778 $3,885 $3,995 $4,108 $0 $0 23.00% $1,250 $1,250 21.74% $850 $2,100 23.03% -$3,176 -$1,075 27.54%

2018 $71,191 $22,858 $12,508 $3,417 $6,933 $63,605 $6,979 $4,824 $16,969 $2,125 $9,597 $6,997 $3,130 $2,041 $6,717 $4,224

2019 $72,344 $23,850 $13,108 $3,473 $7,270 $66,653 $7,624 $5,270 $17,648 $2,185 $9,869 $7,487 $3,219 $2,099 $6,907 $4,344

2020 $73,516 $24,822 $13,718 $3,529 $7,576 $69,754 $8,251 $5,704 $18,354 $2,247 $10,148 $8,011 $3,310 $2,159 $7,103 $4,467

10 Year 10 Year Change % Change $11,035 18% $10,450 73% $7,531 122% $530 18% $2,390 46% $21,645 $4,627 $3,199 $1,797 $547 $2,471 $4,854 $806 $526 $1,730 $1,088 45% 128% 128% 11% 32% 32% 154% 32% 32% 32% 32%

-$6,057 -$7,953 -$10,309 -$12,794 -$15,272 -$18,158 -$21,059 -$7,133 -$15,086 -$25,395 -$38,189 -$53,461 -$71,619 -$92,679 28.27% 29.10% 30.13% 31.14% 32.11% 32.97% 33.76%

* For 2010, derived by subtracting expenditures from income; for each subsequent year, derived by adding FITW, SITW, and SS/Medicare ** Assumed to increase with CPI (2.83%/year) *** Assumed to rise according to the UN Ethanol Equilibrium Curve ǂ Assumed to drop until 2013, then rise 4%/year ǂǂ Healthcare rises 7% per year, and adds $1200 in 2014 ǂǂǂ Deficit equals income - taxes - expenses + Does not include interest on the accumulated debt ++ Reflects 2% SS Tax holiday for 2011 and 2012 +++ Reflects expiration of Bush era tax cuts from 2001 and 2003

Table 9: Revised Budget With Taxgeddon Included Taxgeddon doesn't have much of an overall effect by 2020 – the marginal tax rate is under 34% (33.76%) compared to 31% (30.94%) – an increase of less than 3% of total income. It does, however, reduce the family's standard of living much quicker. Also note that even though income has risen by $11,035, increased taxes wiped out most of that increase ($10,450). In 8 years, the average family will be bringing home the same amount as today, but the value of the dollar will be reduced 33% due to inflation. This leads us to the balanced budget scenario again taking into account Taxgeddon. The same cuts were made as before, but had to take place sooner and were more aggressive.

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Income Before Taxes Taxes * FITW +++ SITW SS/Medicare ++ Average Annual Expenditures Food - At home *** - Away from home *** Housing ǂ Apparel and services ** Transportation ** Healthcare ǂǂ Entertainment ** Cash contributions ** Personal insurance and pensions ** All other expenditures ** Deficit ǂǂǂ Accumulated Savings/Debt Taxes as a percentage of income +

2010 2011 2012 2013 2014 2015 2016 2017 $62,481 $62,731 $63,415 $64,727 $66,087 $67,448 $68,716 $69,953 $14,372 $13,636 $14,604 $17,827 $18,682 $19,628 $20,707 $21,784 $6,187 $6,210 $6,678 $9,381 $9,926 $10,530 $11,183 $11,863 $2,999 $3,011 $3,044 $3,107 $3,172 $3,238 $3,298 $3,358 $5,186 $4,415 $4,882 $5,339 $5,584 $5,860 $6,225 $6,564 $48,109 $47,845 $47,961 $47,029 $47,237 $47,935 $47,907 $48,188 $3,624 $3,944 $4,370 $4,760 $5,158 $5,544 $6,552 $7,381 $2,505 $2,726 $3,021 $3,290 $3,565 $3,832 $2,083 $1,128 $16,557 $14,901 $13,411 $13,948 $14,506 $15,086 $15,689 $16,317 $1,700 $1,748 $1,798 $1,386 $1,426 $733 $377 $388 $7,677 $7,894 $8,118 $8,347 $8,584 $8,827 $9,076 $9,333 $3,157 $3,378 $3,614 $3,867 $5,338 $5,712 $6,112 $6,540 $2,504 $2,575 $2,648 $2,042 $1,575 $1,619 $1,249 $963 $1,633 $1,679 $1,727 $1,332 $685 $0 $0 $0 $5,373 $5,525 $5,681 $4,382 $3,379 $3,475 $3,573 $3,674 $3,379 $3,475 $3,573 $3,674 $3,022 $3,108 $3,196 $2,465 $0 $0 23.00% $1,250 $1,250 21.74% $850 $2,100 23.03% -$128 $1,972 27.54% $168 $2,140 28.27% -$115 $2,025 29.10% $102 $2,127 30.13% -$19 $2,108 31.14%

2018 $71,191 $22,858 $12,508 $3,417 $6,933 $47,564 $7,893 $1,206 $16,969 $398 $7,678 $6,997 $743 $0 $3,778 $1,901 $769 $2,878 32.11%

2019 $72,344 $23,850 $13,108 $3,473 $7,270 $47,993 $8,458 $659 $17,648 $410 $7,895 $7,487 $573 $0 $3,885 $977 $502 $3,379 32.97%

2020 $73,516 $24,822 $13,718 $3,529 $7,576 $48,342 $9,245 $356 $18,354 $316 $8,119 $8,011 $442 $0 $2,996 $503 $352 $3,732 33.76%

10 Year 10 Year Change % Change $11,035 18% $10,450 73% $7,531 122% $530 18% $2,390 46% $233 $5,621 -$2,149 $1,797 -$1,384 $442 $4,854 -$2,062 -$1,633 -$2,377 -$2,876 0% 155% -86% 11% -81% 6% 154% -82% -100% -44% -85%

* For 2010, derived by subtracting expenditures from income; for each subsequent year, derived by adding FITW, SITW, and SS/Medicare ** Assumed to increase with CPI (2.83%/year) *** Assumed to rise according to the UN Ethanol Equilibrium Curve ǂ Assumed to drop until 2013, then rise 4%/year ǂǂ Healthcare rises 7% per year, and adds $1200 in 2014 ǂǂǂ Deficit equals income - taxes - expenses + Does not include interest on the accumulated debt ++ Reflects 2% SS Tax holiday for 2011 and 2012 +++ Reflects expiration of Bush era tax cuts from 2001 and 2003

Table 10: Revised Taxgeddon Budget With Reductions In Discretionary Spending Note: The following scenario reflects just one possibility. Humans will make different decisions, such as cutting insurance before entertainment. Cuts were made as follows: 2013: Reduced apparel and services by 25%, reduced entertainment 25%, reduced cash contributions 25%, and personal insurance and pensions 25%. 2014: Reduced entertainment 25%, reduced cash contributions an additional 50%, and reduced all other expenditures 20%, reduced personal insurance and pensions 25%. Note: Personal insurance and pensions cannot be lowered any further as auto and home insurance are in this category and equates to less than $300/month. 2015: Reduced apparel and services 50%, eliminated cash contributions. 2016: Reduced food – away from home 50% (but increased food – at home 30% of previous year's away from home assuming food cost ratio of 3% for restaurant meals), reduced apparel 50%, and reduced entertainment 25%. 2017: Reduced food – away from home 50% (but increased food – at home 30% of previous year's away from home assuming food cost ratio of 30% for restaurant meals), reduced entertainment 25%, reduced all other expenditures 25%. 2018: Reduced transportation 20% (carpool, paid off car, got cheaper vehicle, etc) , reduced entertainment 25%, and reduced all other expenditures 25%. 2019: Reduced food – away from home 50% (but increased food – at home 30% of previous year's away from home assuming food cost ratio of 30% for restaurant meals), reduced entertainment 25%,
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and reduced all other expenditures 50%. 2020: Reduced food – away from home 50% (but increased food – at home 30% of previous year's away from home assuming food cost ratio of 30% for restaurant meals), reduced apparel and services by 75%, reduced entertainment 75%, reduced all other expenditures 50%, reduced Personal insurance and pensions 25% indicating reduced insurance coverage or not paying at all, and reduced all other expenditures 50%. At the end of 2020, the standard of living has dropped even worse than before Taxgeddon. People will be eating out about the same (down 90%) without Taxgeddon, buying 81% less apparel and services compared to 70%, going out for entertainment 82% in both cases, eliminating cash donations, reducing insurance and pension contributions 44% versus 34%, and cutting all other expenditures 85% instead of 79%. At this point, there are no discretionary cuts left to make while still living legally. The next cuts will be in automobile insurance, health insurance, housing (i.e., going into foreclosure and/or eviction), downgrading cars after going through repossession.

5. Conclusion and Discussion
This thesis set out to investigate the validity of the right-wing, conservative rhetoric, and try to determine if the world is coming to an end “soon.” We learned that “soon” generally has a two-year time frame, and that nothing drastic is going to happen soon. By basing these projections on U.S. Government documents and government officials, we first presume the credibility of the source documentation, and by developing a simple mathematical model for the projections, minimize the possibility of error, or in worst case by documenting the model, allow other researchers to find fault with the model or prove its validity. The hypothesis stated “The typical American's balance sheet (income and expenses) in 2020 will remain approximately the same percentage (± 5%) as it was in 2010.” This was proven to be false. As stated above, nothing drastic will happen soon, however, starting in 2014, the average American family will begin to suffer, and by 2020, the standard of living for the average American will be destroyed. At that point, the average family will pay all of their income to expenses leaving nothing for discretionary spending. Shortly, and likely “soon,” thereafter, the average American family will be forced to declare bankruptcy to seek financial relief from their debt burdens. Future research should delve into the following topics: • Budgetary effects on higher incomes. Higher than average income earners will experience an increased rate of taxation. The same mathematical treatment should be considered to see the effects of higher income families to see how long it will take to reduce them to insolvency. Survey people on how they would execute the budget cuts. The Analysis and Evaluation section portrayed one possible outcome – many others are possible. It would be on interest to survey a large population to see how most people would balance their budget.

In conclusion, the bankrupting of the American population is not just a right-wing rant – it is a mathematical certainty to occur in less than 8 years unless a radical and drastic government fiscal policy change takes place. The current political environment is paralyzed along bipartisan lines so any change is unlikely. The right-wing conservatives are right about the future, but wrong about the time line as it is more than 24 months away.
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Appendix A – References
1. Ben Quayle; Congressman Ben Quayle Constituent Communication; September 23, 2012; Available: http://quayle.congressnewsletter.net//mail/util.cfm? gpiv=2100094706.77017.104&gen=1 2. Foster, Joanna M. / New York Times; Spike in Food Prices Projected by 2013; March 7, 2012; Available: http://green.blogs.nytimes.com/2012/03/07/spike-in-food-prices-projected-by-2013/ 3. Congressional Budget Office; The Distribution of Household Income and Federal Taxes, 2008 and 2009; July 10, 2012; Available: http://www.cbo.gov/publication/43373 4. Heritage Foundation, The; Taxmageddon: Massive Tax Hikes on the Horizon; April 11, 2012; Available: http://www.heritage.org/research/factsheets/2012/04/taxmageddon-massive-taxhikes-on-the-horizon 5. Internal Revenue Service; Payroll Tax Cut to Boost Take-Home Pay for Most Workers; New Withholding Details Now Available on IRS.gov; December 17, 2010; Available: http://www.irs.gov/uac/Payroll-Tax-Cut-to-Boost-Take-Home-Pay-for-Most-Workers%3BNew-Withholding-Details-Now-Available-on-IRS.gov 6. Investopedia; Economic Collapse; Retrieved September 24, 2012; Available: http://www.investopedia.com/terms/e/economic-collapse.asp#axzz27REaxGEW 7. Senator Jon Kyl; OBAMACARE’S REALITY: AMERICAN FAMILIES; September 24, 2012; Available: http://kyl.senate.gov/record.cfm?id=337691 8. Lupkin, Sydney; Conservatives and Liberals Have Different Brains, Studies Show; September 03, 2012; Available: http://abcnews.go.com/blogs/health/2012/09/03/conservatives-and-liberalshave-different-brains-studies-show/ 9. Merriam-Webster; Insolvency; September 26, 2012; Available: Available: http://www.merriamwebster.com/dictionary/insolvency 10. Merriam-Webster; Soon; September 24, 2012; Available: http://www.merriamwebster.com/dictionary/soon 11. New England Complex Systems Institute; The Food Crises: Predictive validation of a quantitative model of food prices including speculators and ethanol conversion; February, 2012; Available: http://necsi.edu/research/social/foodprices/update/figures.html 12. Office of Management and Budget; Budget of the United States Government, Fiscal Year 2010; February 26, 2009; ISBN 978-0-16-090041-9; Available: http://www.gpo.gov/fdsys/pkg/BUDGET-2010-BUD/pdf/BUDGET-2010-BUD-28.pdf 13. Office of Management and Budget; Budget of the United States Government, Fiscal Year 2013; February 13, 2012; ISBN 978-0-16-090041-9; Available: http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/budget.pdf 14. National Bureau of Economic Research; Average Marginal State Income Tax Rates 1977+; Retrieved: September 14, 2012; Available: http://users.nber.org/~taxsim/statemarginal/avratefx.tab 15. Paul Westcott / US Department of Agriculture; USDA Agricultural Projections to 2020; Last updated: May 27, 2012; Available: http://www.ers.usda.gov/media/131925/oce111b.pdf
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16. Social Security Administration; 2012 OASDI Trustees Report; Retrieved September 24, 2012; Available: http://www.ssa.gov/oact/tr/2012/V_B_econ.html 17. Social Security Advisory Board; The Unsustainable Cost of Health Care; September 2009; Available: http://www.ssab.gov/documents/TheUnsustainableCostofHealthCare_508.pdf 18. Urban Dictionary; Soon; Retrieved: September 24, 2012; Available: http://www.urbandictionary.com/define.php?term=soon 19. USA Today; U.S. home prices could rise 4% a year, forecast says; May 9, 2012; Available: http://www.usatoday.com/money/economy/housing/story/2012-05-08/home-pricespredictions/54844880/1 20. U.S. Bureau of Labor Statistics; CONSUMER EXPENDITURES--2010; September 27, 2011; Available: http://www.bls.gov/news.release/cesan.nr0.htm 21. U.S. Bureau of Labor Statistics; Consumer Price Index History Table; Retrieved September 24, 2012; Available: ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt 22. U.S. Bureau of Labor Statistics; Civilian labor force participation rates by age, sex, race, and ethnicity; January, 2012; Available: http://www.bls.gov/emp/ep_table_303.htm 23. U.S. Bureau of Labor Statistics; Databases, Tables & Calculators by Subject; Retrieved: September 24, 2012; Available: http://www.bls.gov/webapps/legacy/cpsatab1.htm

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