Tuesday, November 24, 2009

‘What is the More Important 'Sustainability Issue' of Today: Global Warming or Explosive Federal Debt?’

“Wave of debt payments facing U.S. government” is the somewhat innocuous-sounding headline for the recent 11/23/09 NY Times article, above the fold on the front page of the Monday edition paper, no less. (click on the highlighted article and read it before continuing)

Sounds sort of like a headline for when global warming swells the sea from frozen icecaps melting and the ocean waves rise 10 feet over the mainland.  Which is an apt analogy to use when you consider how much debt we are piling on right now.

What is the more urgent immediate 'sustainability' problem facing America today: global warming or excessive debt by the federal government? 

We contend the more urgent, pressing problem is excessive federal spending.  Now that the esteemed New York Times has jumped on the debt bandwagon, maybe everyone can now agree that it is a massive problem we have to fix…now…today.

It is a lot easier to fix than global warming, believe us.  All we need to do is: 1) stop adding on more spending at the federal level and 2) reduce spending already on the books.  (some programs have been in effect essentially unchecked or reformed for over 80 years)

For some reason, like an alcoholic bumming money for his next drink or a crack cocaine addict stealing money for his next fix, American politicians just keep on spending gleefully as if there is nothing to worry about tomorrow. 

Like with this current health care reform (sic?) bill now pending on the Senate floor.

The earth indeed did suffer from a massive global warming event 250 million years ago when a comet or meteor smashed into the Siberian coal fields and ignited a supervolcano that emitted gigatons of carbon that led to the Permian mass extinction. (You can look it up)

However, during the comparatively very short time of recorded human history of less than 5000 years, thousands, hundreds of thousands, or maybe millions of government units have succumbed to a more deadly disease: bankruptcy caused by overspending and self-aggrandizement of leaders and people.

We don’t really know how many for sure since the Great Library of Alexandria with all of the written history up until that point in time was burned up when Julius Caesar stupidly set fire to Cleopatra’s ships in the Alexandrian harbor. 

Maybe there was some book in there warning future democratic republics about the dangers of government over-spending and accumulated debt.  We will never know.

Here are some points that strike us from this article:

1. For the first time in any publication we have seen, the Times refers to current interest payments as being $202 billion.  That is odd, since most the time, the news media has said it is more like $500 billion per year.

The difference is because the Times apparently has chosen to focus on what is the ‘real’ cost of our interest on the national debt that HAS got to be repaid, not the imputed interest ‘owed’ to the fictitious Social Security Trust Fund, which is non-existent in real economic terms as admitted by the current CBO director.

So maybe the Times has ‘gotten religion’ when it comes to reporting on real federal budget issues and we can move ahead without worrying about the consequences of ever paying back the Social Security Trust Fund or the imputed interest that has been added to it over the years…because it is impossible to do so.

2.  “An additional $500 billion a year in interest expense would total more than the combined federal budgets this year for education, energy, homeland security and the wars in Iraq and Afghanistan.”

Let’s think about this statement very carefully.  When interest rates go back up to their more normal rates, (not if, but when) we are going to be paying an additional $500 billion more per year in interest payments than today.  And you thought the amount we are spending on Iraq and Afghanistan was wasteful and exorbitant for the past 8 years? 

Wait til you get a load of paying all of your taxpayer money in interest expense to the Chinese government just for the privilege of having them loan us more money because we don’t have the guts to control our spending or raise taxes to pay for it all.  How wasteful will you feel that will be?  Not only do we buy all our products from China from jobs we have shipped over there; now we will be sending even higher amounts of our interest payments to them as well.

3.  Who in the world is going to buy and hold our bonds for a long-term, 30-year basis unless they get a very high premium on interest rates given that everyone expects inflation to rear its ugly head as soon as this recession ends?  The rule of thumb is that when interest rates go up, the value of existing bonds go down so how are we going to find long-term buyers under those circumstances?

Just remember, when you see newspapers such as the NY Times that previously paid little to no attention to the dangers of debt accumulation and federal over-spending, start to explain the debt situation, then something serious is going on.

And it ain’t good.

picture courtesy of sxmprivateeye.com

Sunday, November 22, 2009

The Obama Health Care Bill: ‘Is This The Straw That Breaks the Camel’s Back’?

What is it with ‘camels’, ancient proverbs and analogies anyway?

The poor camel gets stuck with all the bad consequences of human actions.  He gets his ‘back broken’ when the last marginal straw is added to his workload.  He gets bad press every time he ‘sticks his nose in the tent’ with the assumption that the rest of his sweaty, smelly body will soon follow suit.

And poor old ‘Joe Camel’ got banned from advertising the brand of cigarette that bears the name “Camel’ in the first place.

Is this health care bill the ‘final straw’ of American legislation that breaks our economy?

We won’t know for awhile, now will we?  What will be the effect on the value of the dollar if it passes?  How about on interest rates?  The ability of the Chinese to continue to buy up our exploding debt?

Are we willing to roll the dice on this monstrous health care bill right now at this precarious time in our national economy and history?  What if the proponents of this bill in Congress and the White House are wrong?  Can we punish them with like they tried to punish the Wall Street and Detroit executives who got it all wrong last year?

Why take such a big chance when our children’s future is at stake?

Somebody’s ‘lying’ in this whole escapade, and no…we are not trying to emulate Congressman Joe Wilson’s emotional outburst during President Obama’s address to Congress on this health care bill several months ago.

Let’s go to the videotape:

1)  ‘This bill will not add one dime to the federal deficit!”

Computer answers:  ‘Of course it will!'

How can it not?  Just look at the cash-flows of the tax increases that begin immediately and the spending starts to kick in big-time in 2014, after the next presidential campaign, conveniently enough.  (see Anne-Marie Turner; Galen Institute)

What these people in Washington deliberately are failing to tell you is that over the 10-year period that occurs after the start of the health care spending portion of the bill, between 2014-2024, the spending will total at least $2.5 trillion. (We have been telling you the same thing for the past 5 months)

One budget expert says this bill will cost close to $4.9 trillion in new authorized spending between 2014 and 2034.

There is no way on God’s green earth that the Pelosi/Reid/Obama tax hikes will be enough to cover this massive increase in spending over the next 30 years.  No way.  You think the payroll tax increases on the upper-income taxpayers will stay only on the upper-income wealthy people? Think again.  The same argument was used when the income tax began in 1913…are you middle-to-higher income salaried people not paying any income taxes nowadays?

Doubt it.

2) “This bill will not hurt anyone now on Medicare!”

Computer says: ‘Not!’

Of course it will.  Particularly those who are now using the Medicare Advantage program that allows a broader range of services at a slighter higher premium than the basic Medigap insurance that the AARP wants to restrict you too.  This bill will reduce the Medicare Advantage program to a shell of its former self by taking those funds and spending them elsewhere in this monstrous Rube Goldberg apparatus of government manipulation and tinkering.

3)  ‘This bill will cover everyone in America with health insurance!”

Computer says: “Heck, no, silly!  Are you kidding me?"

What will all these 'do-gooding' Congressmen and Senators have to do if they actually solved the whole problem in one fell swoop?  That would take away future excuses to continue to meddle in the health care industry and not allow it to take its own normal course based on supply-and-demand principles and risk/cost tradeoffs.

In fact, many independent studies confirm that this health care bill will NOT cover all uninsured Americans.  It will leave perhaps 10 million+ people uncovered by insurance while at the same time, drive up premiums on the rest of the Americans who have private health insurance they do like which might knock up to 5 million of them out of the private insurance market to boot!

How about that for an unintended detrimental domino effect?

So far, all we can see is that not only will the camel soon get completely into our tents, we will have to bind him up to fix his broken back and then smoke Camel cigarettes to calm our nerves down.

Poor health care camel.  Poor us.

picture courtesy of cache.gawker.com/.../2009/07/joe_camel.gif

Saturday, November 14, 2009

“Mr. Obama: Tear Up Your ‘Stimulus Package’!”

 The Berlin Wall fell 20 years ago which liberated Eastern Europe from centralized planning and control (sound familiar?).

President Obama has announced a ‘jobs summit’ to be held at the White House later this year.  We think it is painfully clear what needs to be done to create the millions of jobs we all want and need here in America:  “Tear up the rest of the first stimulus package!”; don’t spend any more money on the TARP program and cut corporate income taxes in America to zero.

Perhaps a brave staffer at the White House will send the following memo along to President Obama:

“Mr. President:

Calling for an economic ‘jobs summit’ at the White House next month is not going to create any more jobs just because you say so.  You are a great orator but you can't just speak and create jobs out of thin air.

Your economic stimulus package has failed to stimulate anything, no matter how much spin your press office puts on it.  It did save teachers jobs in states such as California that were under tremendous financial stress and might build some new bridges and roads over the next several years. However, most businesses are sitting tight on their cash and not expanding or creating jobs due to all the uncertainty out there today.

Government can not ‘create jobs’ any more than it can ‘create wealth’. It can only redistribute wealth already created by the private sector first.

This economy needs an economic jolt unlike any other we have seen in modern times so that business people will be energized, motivated and incentivized to make the capital investments necessary to expand their business which will create the jobs we all want and need right now.

To do that, we suggest the following, bold and yet disarmingly simple solution:

-Eliminate the corporate income tax code from American business.

There. We said it.  Millions of jobs will be created from 2010 to 2012 and you will be re-elected in a landslide of monumental proportions akin to President Reagan in 1984.

Without the onerous yoke of corporate income taxes on American business to pay, corporations with hundreds of thousands of employees on down to companies with only 10 people will see a magnificent window of opportunity open up before their every eyes to expand their businesses and make more money for their stockholders. After all, Mr. President, that has been the primary objective of any profit-making entity since the dawn of time.  Without making a significant profit, there is no reason for any sane person to invest their capital and take the risks necessary to bring a service or product to market.

Once they see that, they will start hiring people right and left and drive the unemployment rate back towards zero where it belongs.

Corporations do not pay taxes; people pay those taxes.  They pay them in the form of higher prices for goods and services each time they consume them.  Consider this a secondary tax cut for 310 million of your fellow citizens, 200 million or so of them who are registered to vote either for you or against you in 2012.

Cancel the rest of the first stimulus package, of which close to $400 billion remains yet to be spent on infrastructure projects. When Mr. Gorbachev allowed the Berlin Wall to crumble in 1989 without a shot being fired, even they recognized that old-style, centralized, top-down government spending programs do not work to create the jobs and lifestyles everyone wants in today’s world.

By repealing the first stimulus bill, and canceling what is left of the TARP package, we could eliminate the corporate income tax and not affect the future budget deficits at all. This approach would cost far less on an annual basis that all of the plans you have put forward so far, like maybe 70% less.

Did you hear that India recently purchased 200 tons of gold which is driving gold prices through the roof?  (see Indian GoldLike the Chinese, they are growing increasingly more concerned that the US does not have a grasp on its economic situation (we don’t) and that the dollar will continue to fall in value.

Mr. President:  All we can conclude with is this statement:  If you and Congress passes nothing else but this one single one sentence bill tomorrow, all of this economic gloom-and-doom will evaporate into a morning mist of fresh air optimism immediately.

Do it for yourself, if you want to get re-elected.  But more importantly, do it for your country.  That is what you were sworn into office to do anyway, sir.”

Respectfully submitted,


Tuesday, November 10, 2009

‘Follow the Money’ and You Will Find the AARP

During the Watergate scandal, Washington Post reporters Bob Woodward and Carl Bernstein were instructed by the secret informant, ‘Deep Throat’, (finally admitted to being a former FBI operative, Mark Rich), to ‘Follow the Money’.

It all led to a chain of corruption and ‘dirty tricks’ all the way up to the ‘Trickster’ himself, “Tricky Dick” President Richard M. Nixon.

Have you ever wondered why and how an august organization such as the AARP could take a political stand and support the House-passed version of the Pelosi Health Care Bill?

The AARP is supposed to be ‘non-partisan’ and operate under the protection and advantages of the non-profit tax status of the US tax code. They are also not supposed to engage in political ‘advocacy’ since they are supposedly ‘just trying to take care of grandma and grandpa’ through getting the facts out there for them to make decisions on when they vote.

Oh, and have they ever told grandma and grandpa that they are engaged in a billion-dollar enterprise to sell Medigap insurance to them on as much of a captive basis as possible?

You didn’t know that? You just thought you paid your little old $10 annual AARP fee and got discounts on movie tickets, rental cars and hotels and maybe an additional discount off of the senior citizens’ dinner special at the Blue Plate restaurant around the corner?

If you ‘follow the money’ in anything close to politics in general and in Washington specifically, you will find your answer to why everything is ultimately done under the guise of advancing the ‘correct’ public policy.

‘Follow the Money’ on the AARP special interests in this bill and you will find that it leads directly to protecting $500 million worth of annual business they have selling Medigap insurance to senior citizens.

$½ Billion. And they will do anything they can to keep it that way for themselves.

Take a look at this very fine piece of journalistic excellence by a dogged advocate for better health care reform by the name of Grace-Marie Turner of the Galen Institute, "AARP Gets What It Wants"

(Galen, by the way, was a Roman physician who was the first person to use methodical, ‘scientific’ ways to analyze physiology and perform medicine around the year 160 A.D. or so. I wonder if he would survive as a physician under the new Obama/Pelosi/Reid health program?)

If you are mad at big business for taking all of that bailout money last year, you ought to be mad about the AARP trying to manipulate the emotions of 39 million seniors by not disclosing the reasons why they want this bill so badly. It has nothing to do with helping seniors have ‘choice’ in their selection of their health care supplemental plans under Medicare. In fact, the AARP wants seniors to have as few choices as possible…as long as the choices are all under the purview and control of, you guessed it….the AARP.

Does it ever make you wonder why the AARP is so entrenched in Washington nowadays? What would happen if, let’s say, 10 million people aged 55-65 did not join the AARP? (I got my card a couple of years ago and promptly burned it like all you older crazy former Hippie Boomers did in the ‘60’s when you burned your draft cards instead of going to Vietnam)

Well, 10 million fewer AARP members coming in when another 10 million of them are aging on over the years would mean approximately $200 million less per year in revenue to the organization. Talk about the cutbacks in staff that would entail! They would also start to lose their biggest weapon, their legendary “see you at the polls’ threat they always use on any politician who even asks a question about whether we can continue to afford Social Security and Medicare in its current formats. (We can’t)

And if you are in your 20’s, 30’s, 40’s and early 50’s, the AARP could not care less about whether or not you have to pay any consequences for these tremendous debts we are running up on your tab. They just don’t give a damn…or else they would not have stood in the doorway to any reasonable changes over the years.

So read Grace-Marie Turner’s great insight one more time before you move on to other things. And then tear up your AARP card, burn it and do not ever join it again….they do not speak for your best interests and the best interests of the nation as a whole.

They care about one thing and one thing only…market share and keeping up their revenues. Sounds just like the Wall Street gang and the Detroit automakers (except Ford Motor..go buy a Ford today!) last year.

“Follow the Money!” It is going from your pockets right into whatever the AARP tells the White House and Congress to put it in.


Thursday, November 5, 2009

‘The Plan’ to Balance Our Budget…and Pay Off National Debt

Here is something neither side is bothering to tell you nowadays, even though we have crushing budget deficits, a Mount Vesuvius of national debt to contend with, an aging Boomer generation that is about to enter and bankrupt Medicare and Social Security completely and the Chinese government getting pretty squeamish about holding US dollar-denominated bonds when they know they are going down in value, not up:

“We don’t have a long-term, or even a short-term plan, to deal with any of our budget problems.  None. Nada. Not one!”

Scary, isn’t it?  It is like we are flying in a blinding snowstorm in the mountains and the pilot comes on the intercom to say: “We are not quite sure where we are going but we are sorta sure we will land alright.  We promise. Trust us.”

If you have heard anyone from the White House to Congress on either side of the aisle say they have 'a plan', please recite it for us in 30 seconds or less.   We have not heard one yet.

Let’s put something out there to show you just what we are up against.  Take a look at the CBO budget projections and sort down to page 4, 'CBO Baseline Projections'.

We are spending $3.5 trillion in outlays this year, 2009, including this 'not-really-doing-its-job' ‘stimulus’ money and all of the financial bailouts ad infinitum. The federal budget was less than $1 trillion in 1985, just for frame of reference.

Take a look at the revenue line in the CBO projections.  We won’t even be taking in $3.6 trillion in tax revenues from all sources until 2016….7 long years from now! 

Your beloved 5th grader or grandchild will be going to college by the time we have enough revenue to cover the expenses we are incurring right now in 2009

That just ain’t right, ladies and gentlemen.  In fact, it is downright dishonest, immoral, unethical and stupid, to be honest about it.  We used to berate banana republics in Latin America for running such huge deficits and being so irresponsible in the management of their nations.  We are making them look great by comparison.

The only way to hold down spending is to stop spending in the first place.  Period. We can’t afford any of these new programs really, regardless of what anyone in the fantasyland of Washington wants you to believe.

We ought to repeal what remains to be spent from the stimulus bill and the bailout bills right now. Instead of worrying about if this health care bill will be 'budget-neutral' over 10 years or not, (it really isn't due to some funny business going on budget accounting-wise), we ought to start over and not add any more spending above what was spent last year.

No one is willing to raise taxes on everyone, including the 50% who now pay zero income tax, because it will guarantee their loss in the next election. Most very wealthy people are going to be able to hide from it anyway so why even suggest it in the first place?

Here is a very simple way to balance the budget in the rest of our lifetimes: Hold overall federal spending at current FY 2009 levels of roughly $3.5 trillion. Like for the next decade or more. Once we do that, we can run annual surpluses to pay down the debt over the next 25 years or so.

What is so difficult about that?  We bet you have held your spending to a flat level, or below, over the past two years.

We know for a fact that there are enough obsolete, archaic, mismanaged federal programs across-the-board from defense to education to health care that we could save 3% in federal spending per year for the next 10 years to get us out of this mess in which we are now mired.  There is nothing 'magical' about increasing federal spending every year by 3%+; that is just the cowardly way out of making the hard decisions we elect people to go to Washington to make on our behalf.

There is a very simple-to-understand, albeit blunt, legislative instrument to enact this crucial national goal.

There is this thing called the “CR” or ‘continuing resolution’ that Congress passes almost every year to continue funding the operations of the federal government at last year’s ‘authorized levels’.

Did you know that we can’t borrow any more money unless Congress authorizes it by passing a new ‘debt ceiling’ which they are getting ready to do soon?  If we keep passing CRs for the next 10 years, then we won’t ever need to raise the debt ceiling, now at around $12 billion, now will we?  At least the debt wouldn’t go to $20 trillion as currently projected.

We would have to also pass annual ‘budget reconciliation’ bills to accommodate the many changes we will have to make in Social Security, Medicare and Medicaid in order to stay under the current $3.6 trillion spending limit for the next decade.  These two budget bills would force Congress to stay in session all night long for a couple of months to come up with reductions in spending.  But that is ok by us.  Congress can do it.  We have made major changes in entitlement programs every year a reconciliation bill is passed, even though these programs are called ‘mandatory’ and considered ‘untouchable’.

Former Congressman McMillan and a few nutty budget staff people like me presented $177 billion in Medicare reductions alone over a 5-year period in 1993 and no bolt of lightning struck us down then.  The core of those changes finally passed in 1997…it takes awhile for things to get done in Washington.

So there you have it.  A ‘plan’ to balance the budget, stop adding to the national debt and start paying down the debt in 2016 so your kids will not absolutely think you are part of the craziest and stupidest generation in American history.

Have you heard President Obama state a better plan?  The Republicans?  Anyone? Bueller? Ferris Bueller?

In the absence of a better alternative, we have to take the initiative and sound the charge. This is one selfless act we Boomers have to make and win.

Mount Vesuvius picture courtesy of www.bible-history.com