Archive for category National Debt
the Spending Limitations Amendment would eventually put us on a sustainable path
Posted by Tom in Centrally Managed Economy, Congress, Constitution, Deficit, Financial Crisis, Financial Policy, Monetary Policy, National Debt, Nationalized Health Care, Statism on March 6, 2010
Even without any more stimulus, bailouts, Obamacare, or cap and trade the US is on a course to bankruptcy. Consider:
- In the past five years federal spending has increased 42% to nearly 25% of the economy, the highest level since World War II.
- The deficit has exploded from $318 Billion in 2005 to $1.4 Trillion, a 400+% increase, equal to the entire accumulation of debt from George Washington to Bill Clinton.
As James Antle points out in his American Spectator article, Amending the Spending, “this will be remembered as a golden era of fiscal responsibility compared to what is to come.” Again I emphasize, this is even without Obamacare, added stimulus, bailouts, etc. With demographic certitude, as baby boomers retire, social security, medicare, and medicaid as we know them will be bankrupt. THE PUBLIC DEBT WILL EXCEED 110% OF THE ECONOMY IN 2026 AND CLIMB PAST 200% BY 2040! Again, this is without Obamacare, added stimulus, bailouts, etc.!
Three congressmen, Mike Pence (R-Ind.), Jeb Hensarling (R-Texas) and John Campbell (R-Calif.) have proposed a constitutional amendment to cap federal spending at 20% of the U.S. economy. The limit would be waived only when an official declaration of war is in effect or by two-thirds majorities of both houses of Congress. 20% is the historic average share of the economy consumed by the federal government.
The backers admit that Republicans are just as spendthrift as Democrats. They are not naive about getting it passed, 5000 amendments have been offered and only 27 enacted! But the mood of the country seems to be shifting to a serious concern for the current fiscal insanity.
If they’re correct, and the amendment has some legs, the country can get off the current unsustainable course and onto a path that’s fiscally sustainable.
Tom Motherway
What’s Obama Up To?
Posted by Tom in Centrally Managed Economy, Deficit, Democrats, Economics, Financial Crisis, Individual Freedom, National Character, National Debt, Nationalized Health Care, State Finances, Statism, Taxation on March 5, 2010
On paper Obama appears to be a smart guy and reasonably well informed. I suspect he knows:
- We face $1.4 Trillion annual deficits for the next decade.
- Our current national debt is $12.3 Trillion and will grow by $1 Trillion a year.
- Estimated unfunded liabilities from social security and medicare are $107 Trillion.
- States with aggregate deficits of $350 Billion, debt of $1.9 Trillion, and unfunded liabilities of $1.4 Trillion are asking for federal handouts.
- Unemployment is 9+% with private sector growth stalled.
Why then would he promote a radical takeover of healthcare with 10 year costs of $2.3 Trillion that adds $1.86 Trillion to the deficit over the next 20 years, that creates employment taxes and mandates, each discouraging private sector employment, and that fails to solve the demographically certain failure of medicare, social security and medicaid? We’ve proven our inability to handle two, no three if you include medicaid, major entitlements, why add another? And why would he risk his party’s control of Congress and his own ability to govern to attain this goal that a majority of Americans don’t want?
Obama is smart enough to know that Obamacare will exacerbate the financial straights of the United States. It’s uncertainty will decrease private sector employment. It’s taxes will decrease private capital for investment. It will cede financial and technological leadership to other countries. In short, we will be worse off tomorrow than we are today. Why would he risk that…want that?
It is clear that he knowingly intends to drive us further to the brink. It is also clear that given his apparent intelligence he has an end-game in mind. Take our admitted crisis, you know the “never-let-a-crisis-go-to-waste” kind, explode it into a gigantic, off-the-clff catastrophe, then come up with a one-of-a-kind, popular solution that involves “shared pain” and if we are all lucky, someday “shared gain.” Call it a Cloward-Piven Strategy on steroids. (See: Cloward-Piven Strategy: Is It Obama’s? and references cited therein.)
As Larry Kudlow said in NRO, One Giant Government Leap Backwards,” One of the most galling features of this plan is a taxpayer-subsidized government-insurance entitlement for people earning up to 400 percent above the poverty line, or nearly $100,000 for a family of four. In other words, a middle-class health-care entitlement that will add millions of people to the federal dole. It’s all too reminiscent of the political dictum of the old New Dealer Harry Hopkins: tax and tax, spend and spend, elect and elect.”
So will Obama’s “Fiscal Responsibility and Reform Commission” turn out to be the VAT Commission with a European 12% sales tax on top of the income tax, excise tax, etc. And those on top of the various state sales, income and property taxes? All this to finance BIG GOVERNMENT? If so, we will then all have the advantage of being “in the same boat,” “equal,” and “happy” in an ever declining country and economy.
So for the literarily inclined, Obama wants us on Hayek’s Road to Serfdom where we will encounter Orwell’s Animal Farm with 1984’s Big Brother in control. As Obama recently said in response to a push-back, “we won the election.” And win the next election and the next, he aims to do with the creation of more and more dependency on him and less and less individual responsibility.
I won’t be around to witness the outcome but I hope the next generation will become informed and engaged, lest our grandchildren and great-grandchildren suffer horrible consequences.
Tom Motherway
President Obama Lies to Take Over Healthcare
Posted by Tom in Centrally Managed Economy, Deficit, National Debt, Nationalized Health Care on March 4, 2010
Yesterday, Barack Hussein Obama flanked by doctor props in white coats, urged passage of his Obamacare. (Teleprompter first, now props, what next?) He offered the following points in support of Obamacare:
- “my proposal would bring down the costs of healthcare for millions–families, businesses and the federal government.”
- it is “fully paid for.”
- it “brings down our deficit by up to $1 trillion over the next two decades.”
Despite the president saying that everything about healthcare has been said what hasn’t been said or heard, as stated euphemistically in today’s WSJ, is that there is not one shred of honesty in what Obama is saying about the true cost of Obamacare. In short, HE LIES!
Paul Ryan is the white knight truth teller here:
- 10 years of payments for 6 years of benefits–true 10 year normalized cost is $2.3 Trillion, not the $950 Billion sold by Obama.
- double counting $52 Billion in social security taxes as offsets, even though they are reserved for social security–aren’t we obligated to pay social security?
- double counting $72 Billion from the long-term care insurance program and counts them as offsets even though they are obligated to pay for long-term care. Democratic Senate Budget Chair, Kent Conrad, said this was a Ponzi scheme that would make Bernie Madoff proud!
- $500 Billion raided from Medicare to go as an offset when the chief actuary of Medicare says that this will cause 20% of Medicare providers to go out of business or stop seeing Medicare patients!
- “doc fix” $371 Billion is taken out of Medicare, used as an offset, then put back into a separate bill which the CBO does not count against Obamacare.
- cost curve is bent up not down, the chief Medicare actuary says Obamacare increases costs by $222 billion.
- Obamacare raises the deficit by $460 Billion for the first 10 years and $1.4 Trillion for the second 10 years; total added deficit for two decades is $1.860 Trillion.
These points were clearly made to Obama by Paul Ryan and the chief Medicare actuary. (see: Obama Can’t Answer Paul Ryan, and Paul Ryan LIVE–Ya gotta love this guy.)
Yet Obama stood up yesterday with doc props, gimmicks, double counting, and “doc fix” subterfuge, and LIED TO THE AMERICAN PEOPLE. Shame on him.
Tom Motherway
Obama Can’t Answer Paul Ryan
Posted by Tom in Deficit, Democrats, Government Regulation, National Debt, Nationalized Health Care, Statism, Taxation on February 25, 2010
Stephen Spruiell’s succinct report today in NRO, Ducking and Dodging, clearly sets out the Obamacare fiscal deficiencies highlighted today by Paul Ryan. Representative Ryan blasted Obama’s “insurance care” today and none of the Democrats could counter his arguments. Basically he pointed out that Obamacare front-loads tax hikes and Medicare cuts and defers costs, forcing the CBO to score ten years of offsets with only six years of spending! The true cost of the bill is $2.3 Trillion not the $950 Billion advertised by Obama.
Ryan focused further on other Democratic gimmicks:
- Double Counting: “savings” are counted as offsets for spending and at the same time reserved to pay for future entitlements. Example, $52 Billion in Social Security tax increases.
- “Doc Fix”: The bill’s 21% cut in Medicare reimbursements is put back in via separate legislation not subjected to combined CBO scoring.
And what does the wimpy Obama say in response? “We have some strong disagreements on the numbers, but I don’t want to get too bogged down!” If there were disagreement you would think he would have answered the criticisms.
As for getting bogged down, Obama should start getting real bogged down in his record breaking deficits, unsustainable national debt and bankrupting unfunded liabilities. Instead he is hell-bent-for-leather to add to that trio of financial irresponsibility. And this at a time of high unemployment when small businesses won’t hire because of the uncertainty, regulation and taxes proposed with Obamacare!
I guess destruction of our economy is a small price to pay for these socialists to gain total control of that economy. You’d think they would see it as a bad bargain.
I pity our future generations.
Tom Motherway
IT’S THE SPENDING, Stupid!
Posted by Tom in Congress, Deficit, Economics, Financial Crisis, Financial Policy, National Debt, State Finances on February 20, 2010
John Mauldin’s letter this week follows last week’s Greek tragedy with the “pain in Spain” and future of the Euro. How long will the Germans support the spendthrifts?
He then again brings the same spendthrift problem back across the pond concluding with a reference to Dan Henniger’s WSJ February 18th Wonderland column, It’s the Spending, America. Dan treats the runaway spending which has only accelerated under Obama, Reid, and Pelosi. This despite economists of all stripes saying it is unsustainable. I wanted to comment on the column but couldn’t get the graphic. John Mauldin supplied it and here it is:
“We’ve been grinding toward this moment since 1932. It has always been a question of political physics just how high government could go in the U.S. before it arched over and down. Now we have Washington, California, New York, New Jersey and others all arriving at the same time of reckoning. And all for the same reason, public spending by the public sector—its politicians, its unions, its massive schools of pilot fish.”
This blog has previously railed against Dual Bankruptcies-Federal and State which will indeed occur unless the entitlement spending is reined in and reined in hard. Obama’s deficit reduction commission will wind up a side show unless Social Security, Medicaid, and Medicare are substantially cut, painful as that definitely will be.
Social Security should be means tested and stopped for the upper quartile earners after payments into the system have been returned with some small rate of interest. Cost of living increases should not occur unless the CPI growth exceeds 5% for the year. Retirement age should be lengthened for those under 50 and premiums be increased. Medicaid should be limited to cover only serious illnesses not every sniffle and scratch. Medicare should be means tested and again limited to serious illnesses not every sniffle and scratch; premiums should be increased.
Political will and guts is hard to come by these days. But is seems we should at least be able to expect the current administration to cease its expansion of spending, Obamacare being the prime example followed closely by cap and trade.
Hey, Barack, Harry, Nancy–what part of UNSUSTAINABLE don’t you understand?
Tom Motherway
Greece…A Prelude!
Posted by Tom in Centrally Managed Economy, Congress, Deficit, Democrats, Economics, Financial Crisis, National Debt on February 13, 2010
“Beware of Greeks bearing gifts,” sang Virgil. I fear Greece is today’s Cassandra of mythology, so beautiful that Apollo granted her the gift of prophecy yet, when she did not return his love, cursed her so that no one would ever believe her. Some gift!
John Mauldin’s Weekly E-Letter, which I highly recommend, treats the Greek debt crisis and its causes and consequences. He starts by positing the oft neglected truism of our path-dependent world. Namely, the choices you have made in the past restrict, sometimes drastically, the choices you now have before you. The “if only(s)” and “if I’da(s)” have occurred to all of us as we confront a new situation often forcing a choice of the lesser of two evils.
John traces the creation of the Euro noting the weak Euro nations like Greece got a bit of a pass and an uptick in the translation of the national currency. The local currency overvaluation meant that Greek consumers could buy products previously out of their reach. The government could borrow at lower rates. Spend they did and borrow the government did so that deficits ballooned. National debt is now 254 Billion Euros; Greece needs to borrow 64 Billion, 30 in the next few months.
Other European nations have pledged support, “but!” Germany is calling the shots but so far there is no checkbook out. Imposition of “austerity” conditions, severe ones, portend depression, serious recession, and inflation for generations. The unionized socialist nation will be little tolerant of “austerity.” Strikes have already ensued and are likely to get worse.
For Germany and France a contagion conundrum gets worse. Behind Greece standing in line are Portugal, Italy, Ireland and Spain, the lot known as PIIGS in financial markets. The solvent nations of Europe cannot afford to rescue all the laggards. Moral hazard raises its ugly head once again. Sound familiar?
Then there is the fear of collapse of the banking system. The BIS reports that the largest holders of Greek debt are the French, Swiss and German banks. This is another banking crisis in the making. And it is not just a write down of Greek debt but a mark-to-market of sovereign debt! It’s likely the accounting rules will be rewritten to soften that blow. As you would guess, money is flying out of Greece and the tax avoidance, already 30% of the economy, is accelerating.
As John points out: this is not just a Greek problem. Debt and out of control deficits are a problem all over the developed world. The US is one of the worst with Obama deficits, Obama debt and the unrecognized and never discussed unfunded liabilities. And Obama wants to ADD TO THE DEFICIT with his Obamacare proposal. He has a tin ear to reform of Medicare and Social Security first.
John Muldin concludes: “We are in the fullness of time approaching the End Game. …choices that have been made over the last decades will yield a Greek situation, where there are no good choices. And the longer the hard choices are put off, the more difficult they will become.”
Obama, Reid, Pelosi, the Democratic leftist hear but don’t listen and those of the pseudo-intellectual elite who listen don’t believe. Cassandra, your prophecies are tragic indeed. More so by the immorality toward our grandchildren and unborn great grandchildren.
Tom Motherway
Obama Wants Republican Ideas To Save Obamacare–Just Say No
Posted by Tom in Government Regulation, Individual Freedom, National Debt, Nationalized Health Care on February 11, 2010
Jay Cost has a great post today in Real Clear Politics, The Blair House Stunt. He posits Obama’s invitation to Republicans to advance their healthcare ideas as either an honest attempt at a bipartisan reform of healthcare or a political stunt. He concludes it is a political stunt meant to help the Democrats by hurting the Republicans. This for three reasons: a) it’s televised giving the glib snake oil salesman his foil over lesser debaters, b) the invitation was extended to party leaders not the more moderate/liberal Republicans, and c) there are only nine months before the midterm elections so why would the Republican leadership want to help put lipstick on this pig!
Jay Cost’s reasoning is persuasive. Obamacare is the albatross around the Democrats necks as recently demonstrated by Scott Brown’s Massachusetts victory. Recent polls show the public against the takeover of 16% of the economy.
Obama has said that he is not willing to start with a blank sheet of paper which is the only way to negotiate a compromise. He wants his core elements in Obamacare. Most of those core elements are statist, anti-free market, and deficit growing at a time when the nation is near bankruptcy.
So there is no real hope of bipartisan compromise given Obama’s ground rules. Why waste time the Republicans could better spend by going directly to the voters with a cogent set of reform ideas: 1) allow all insurance to be sold across state lines, 2) tax employer provided benefits as compensation, 3) encourage individual policy ownership and portability by allowing a modest tax credit, 4) expand Health Savings Accounts scope and deductibility so more attractive high deductible policies would come to market, and 5) enact serious tort reform to eliminate gross legal fees and defensive medicine. In short, this simple reform would make the patients the medical consumers responsible for their own insurance. It would reduce the overall cost of healthcare with increased competition and decreased lawsuit diseconomies. Finally, it would not add to the deficit and in fact would provide additional revenue to the treasury to reduce the deficit.
The Republicans should politely just say no to Obama’s invitation as it stands. At the same time it is reasonable to state the principles that are necessary for health insurance and healthcare costs containment. That can be done succinctly in a way that the voters will easily appreciate.
Tom Motherway
The Great Spender–History Repeating?
Posted by Tom in Deficit, Economics, National Character, National Debt, Obama Budget & State of the Nation on February 2, 2010
Like the obese people who resolve to diet BUT STARTING NEXT week, St. Augustine prayed for continence but BUT NOT JUST YET, and Obama in his state of the union resolved fiscal restraint and deficit reduction BUT NOT THIS YEAR! Given his $3.8 Trillion budget submission and its $1.6 Trillion 2011 deficit with its Trillion dollar deficits that follow throughout the decade, the promised fiscal restraint and deficit reduction will not come before the nation is bankrupt.
As today’s WSJ editorial points out, this Obama budget is “one of the greatest spend-while-you-can documents in American history!” The budget will reach a post war high of over 25% of GDP, well over the 40-year average of 20.7%. As with most budgets the assumptions are optimistic. And despite nearly $2 Trillion more in taxes and fees, the decade long deficits will add $8.5 Trillion to the national debt.
You would think Obama would learn something form history, but that’s not the case. A friend, Ron Tomsic, sent this April 20th, 1934 cartoon from the Chicago Tribune. (Double click the image for a full size image.)
It took World War II to bring the country out of the Great Depression. Anyone think Obama will relish that prospect?
Tom Motherway
Just Say No
Posted by Tom in Congress, Deficit, Democrats, Economics, Financial Crisis, Financial Policy, National Debt, Taxation on January 25, 2010
Facing $1.4 Trillion in annual deficits for the next decade, current national debt of $12.3 Trillion and 2009 estimated social security and medicare unfunded liabilities of $107 Trillion, Obama endorsed a bill that would set up a bi-partisan deficit-reduction commission.”These deficits did not happen overnight, and they won’t be solved overnight,” Obama said in a statement. “We not only need to change how we pay for policies, but we also need to change how Washington works. The only way to solve our long-term fiscal challenge is to solve it together — Democrats and Republicans.” Is this just another Obama promise like “no earmarks” or “negotiations on CNN?” Or, is it designed as a set up for the Republicans to cover the Democratic Congress’ and administration’s spendthrift ways?
Let’s see, we’re up in discretionary spending by 8% in 2009, the third such consecutive year since the Democrats took control of the Congress, that’s 25% from $873 Billion to $1.090 Trillion. The non-defense discretionary programs got an 8% bump in 2009 and again in 2010 not even including the $311 Billion in additional “stimulus.” The omnibus 2010 appropriations bill includes: a 120% increase in low income energy assistance, a 30% increase for the corporation for national and community services (SOUND FAMILIAR?), a 22% increase for the essential (?) (read rural congressmen’s) air service, and, of course, a 9% increase for Amtrak. (See Heritage Foundation report here.)
Does anyone remember the inflation rate? How about public employee salaries? Well then, try Congressional junkets? Surely then, the recession, the unemployment rate and our belt tightening? Enough said!
Problem is that these discretionary increases add to the “baseline” for future years!
Why should Republicans participate in the inevitable tax and tax solution that the Democrats have in mind? As demonstrated, they will not cut and cut, the only correct solution.
There are two reasonable alternatives to put to these out-of-control fools: one, tell them to repeal all non-defense discretionary spending enacted in the last three years and start with a zero baseline budget, and two, tell them NO, HELL NO! Let them clean up their own mess!
The second is easier to explain to America. Some of us still have our wits about us and would appreciate it! Say HELL NO!
Tom Motherway