Monday, January 28, 2013

'Which Entitlement Program Do We Cut, King Solomon?'

'How do we cut the baby, King Solomon?'
Now that we have settled the 'rich paying their fair share' issue, it is time to turn attention to the real problem in the federal budget, spending.

You don't think the tax debate is over? President Obama has gotten the last tax hike he will ever see, or any other Democrat, for the rest of his term and their lifetime.


Because he has proven beyond a shadow of a doubt that every time a Republican in Congress or the White House gives an inch on higher taxes on anyone, Democrats will not reciprocate with even a centimeter of spending cuts.

Just take a look at the fiscal cliff deal. 98% of Americans get to keep the tax cuts George W. Bush 43 and the GOP Congress gave them in 2002/03. They are now permanent thanks to President Obama and a GOP House.

But the GOP got nothing in return for biting the bullet on making poor old Warren Buffett get what he said he wanted: 'Higher Taxes on the Rich!'. No spending cuts. No entitlement reforms. No raising of the retirement age for SS and Medicare.

In fact, all the GOP and the country got was more of the same: More spending and more debt.

There is not a Republican or conservative in Washington today who will EVER vote for another tax hike as part of any deal with this President and this Democratic Senate. They just never give the Republicans what they really want: political cover to vote for Medicare and Social Security reforms which everyone with half a brain knows are the largest part of the entitlement bomb that is driving up cost in the federal budget and the deficit and the national debt.

So, now that President Obama will be the longest sitting lame duck in history if he insists on raising taxes further on anyone, what can be done?

For one thing, the GOP House can start showing the American people what is really at stake with no budgetary constraint or setting of priorities:
'Discretionary programs will be steadily eroded until and unless entitlement programs are reformed and curtailed in growth rates and expansion.'
It will be like King Solomon forcing the women with the dispute over who was the 'real mother' to 'make a decision' and make it the right one. (1 Kings 3:16-28)

We think Speaker Boehner should open up Congress as the Committee of the Whole every weekday after they have done some other important business like naming October 26 'National Mule Day' (our very favorite worthless act of Congress ever in history). He and the Republican leadership should let each and every representative on a bi-partisan basis offer spending amendments to reduce discretionary programs up to the same amount that all the entitlement programs are expected to grow this year.  Unless, of course, Congress decides to do the right thing and reform and cut entitlement programs in the first place.

Once the entitlement growth dragon is slain, (if ever) primarily in Medicare and Medicaid, then everyone can go back to protecting their own part of the discretionary pie just as they have always done under regular order and the 'normal' committee process (where they will never be cut again since no one wants to cut someone else's favorite program for fear that they will want to cut theirs)

The debate would look and sound something like this:
'The gentlelady from North Carolina is recognized.
'I rise to offer an amendment to reduce the funding for research on blind albino squirrels at the University of Idaho by $250,000, which is precisely the amount of money being spent on Medicare in the next 23 seconds as we speak on this hallowed floor.
If we are not going to fix what ails us in entitlement spending, then we have to find those savings by making such tough decisions as not funding research on these poor blind albino squirrels. Tough times demand tough decisions and I am ready to make them.  
How about you?'
Who in their right mind is going to vote against that amendment with the glare of C-SPAN cameras capturing their every move? It might not be as riveting as the debate leading up to the passage of the 13th Amendment that freed the slaves (you really should see 'Lincoln' before it goes to Netflix) but, cumulatively, making these spending priority decisions will be very important to the future health and welfare of our nation and our children.

One of our more grizzled veteran and denizen of the Washington deep friends responded when we approached him about this idea with the following (you know who you are):
'They could talk about selling off specific national parks (regretting it all the way, of course), but talking about what kind of revenue could be generated if we allowed Hilton to build a hotel overlooking Old Faithful or developers to build retirement homes along the Blue Ridge Parkway.  
Since Obama won't let the nation use Yucca Mountain to store nuclear waste, why not fill it with compacted garbage from New York or LA? They would pay a fortune to drive it to Nevada, I am sure. Hell, I bet with some thought we could create a lot of revenue-producing opportunities.'
Indeed. If President Obama and the Democrats won't agree to any reasonable spending cuts or reforms in entitlements, and since the GOP has already caved in and let the White House win on the 'tax fairness' issue by making rich people pay more each year, then the only other way to get to a balanced budget other than slicing and dicing discretionary programs with a Veg-o-Matic is to sell off assets or get recurring cash-flows from naming national monuments like BCS Championship Bowl Games:

'Climb to the Top of the Chick-Fil-A Washington Monument!'
'Skateboard Around the Jefferson Memorial!'
'Swim Laps in the Reflecting Pool in Front of the Lincoln Memorial--
Sponsored by The New Lincoln--Drive A MKX Today!'

There is a serious proposal in here somewhere, we promise.  We think the time has come to drop the charade that raising taxes will ever balance this budget, not in the shape it is in today.  The Fiscal Cliff tax hikes will cover perhaps, maybe 6% of the budget shortfall over the next 10 years. If our annual budget deficits had been at the $100 billion or $60 billion, well, then perhaps the tax hikes would have done the trick.

But they weren't and haven't been for the past 4 years, now going on 5. Massive restructuring and reform of Medicaid, Medicare and SS are necessary unless we want to keep adding on debt until it becomes unmanageable, especially when (not if) our interest rates return to a normal level of 5% or more.

It is either reform entitlements or chop the heck out of every discretionary program you probably like and support for the good it does in our society in your opinion.

If you don't believe us, you need to read this book by our Progressive Liberal Friend (yes, we have 'em) Professor Donald Taylor of Duke University, 'Balancing the Budget is a Progressive Priority'.

When you see people from the other side of the political spectrum saying let's balance the budget, you know it is getting serious.

Saturday, January 26, 2013

When Does 'Government Assistance' Go Over The Goal Line?

Bank of America Panthers Stadium
There are just some things government has to do for the rest of the nation. Defend us against foreign invasion and terrorist attack at the federal level for one thing. We don't want 50 state governors sending state troops all over the globe, now do we?

Maybe now that we have rung up the debt bill to over $16 trillion on its way to $22 trillion, now is the time to maybe get serious about establishing some very hard barriers beyond which government assistance should not be given nor even considered.

'If not now, when?' Ronald Reagan challenged us as a nation in his second inaugural address in during the only inauguration held in the Rotunda due to the Siberian snowfall that hit Washington on January 20, 1985.

'If not us, who?' Indeed. It is the same truth today as it was in 1985.

A pertinent question about the role of government has to do with the recent decision by the Charlotte City Council to give the Carolina Panthers $125 million to refurbish and update the Bank of America Stadium.

Here's the question:
'What is the difference between 'corporate welfare' and 'general welfare' when it comes to spending taxpayers' hard-earned taxpayer dollars?'
Whenever taxpayers' dollars are spent for any collective purpose, they become 'different', don't they? Whenever a dollar is appropriated for whatever purpose by any government entity, it becomes some form of 'welfare' whether you like it being called that or not, right?

Many conservatives see government money being spent on housing and food programs for the poor and labled some recipients 'welfare queens'.

Many liberals view taxpayer bailout of Wall Street as 'corporate welfare for the greedy fat cats'.

Many people see excessive payments for million-dollar hammers and toilets in the Pentagon budget as being 'welfare for the military/industrial complex' as coined by President Eisenhower.

Let's face it: The truth of the matter is that if you support government funding for anything; Wall Street, stadiums, food assistance, you consider it to be 'a worthy investment in our future, or our people or our children'. If you don't support the use of taxpayer funds, it is 'welfare', plain and simple.

Is taxpayer support of a privately-owned, held and operated venture such as the Carolina Panthers and Panthers Stadium which is fully owned by the Richardsons an 'appropropriate use of taxpayer dollars'?

We are not convinced.

True, the Carolina Panthers bring lots of joy to the community when they win, just like any other NFL franchise around the nation. Is that worth $125 million in taxpayer 'welfare' support?

There are some studies that would argue that NFL franchises spur economic activity in the cities in which they operate. They certainly spur jobs and economic growth when the stadium is being built, as long as local contractors and suppliers are used to build the stadium with local employees.

But other studies conclude that the economic activity caused by 8 home games out of 365 days per year is a mere piddling return on any public investment or infusion of taxpayer capital. Aside from 'goodwill' and 'putting a city on the map!', what else can a NFL football team do to offer elevated returns on such a massive public investment into a football team?

Jack Kent Cooke built Redskins Stadium in Landover, Maryland with his own private funds. Abe Pollin did the same thing with his own money to build MCI Center in Chinatown in a downtown area of Washington, DC that needed massive urban renewal and got it with this privately-funded stadium.

Both men were wealthy before they bought both franchises and before they built both stadiums. They built their wealth without massive use of taxpayer subsidies most likely. Why should they all of a sudden turn to the siren call of taxpayer largesse to fund an increase to their own wealth even further?

Panthers Stadium was built  in 1995-96 with taxpayer-supported bonds but they were retired with a very unique thing for the very first time in major league sports in America: PSLs. The Personal Seat License that people paid close to $2000 for the privilege to buy one season ticket seat to watch the Panthers. Above and beyond what it cost to pay for the tickets each season as well.

Put a checkmark in the column of Jerry Richardson for retiring public debt before the taxpayers of Charlotte had to pay too much in interest since the bonds were paid off and retired within a 5-year time frame from time of construction.

Today, he and his family own the stadium and the franchise scot-free. 100% along with some minority partners most likely. The taxpayers own nothing except the joy and pride of having a NFL team in Charlotte, North Carolina.

What will the taxpayers get when their $125 million taxpayer investment is used by the Panthers to put in expensive suites available only to the well-heeled and well-to do and some new scoreboards and video equipment?

Nothing tangible. They will have been able to secure the presence of the Panthers in Charlotte for perhaps the next 10 years. A Los Angeles businessman has an offer on the table for $2 billion to buy the franchise, but not the stadium, from the Richardson family.

Why not the stadium?  Because he can't dig it up and move it to Los Angeles, now can he? If the Panthers leave after 10 years, Charlotte taxpayers will have improved BoA Stadium in 2013 to the tune of $125 million with the finest skyboxes and scoreboards and video equipment the world has ever seen...and it then will be as empty as the Colisseum is in Rome today crumbling all about if the new owners decide to uproot the team in 2023.

Since the Richardsons were trailblazers in the use of PSLs that helped reduce taxpayer exposure through the issuance of bonds, we have another idea for them to consider which might set a whole new trail for taxpayer-supported NFL, MLB or NBA stadiums for that matter nationwide:

'Make the taxpayers of Charlotte a participating partner in the continued success of the Carolina Panthers'
  1. In return for the $125 million in taxpayer funds to upgrade the stadium, the Taxpayers of Charlotte will receive a 12.5% share of any appreciation in the value of the asset from now until the franchise is sold.
  2. The value of the Panthers is now estimated to be $1 billion including the stadium. 12.5% represents the $125 million to be invested by the Taxpayers of Charlotte
  3. If the asset value of the Panthers does not go up, the Taxpayers of Charlotte will get no return on their investment.
  4. If the team is sold for $2 billion, the Taxpayers of Charlotte will get a $125 million lump-sum payment that the City Council can then decide to rebate to the taxpayer; use to improve schools or retire existing debt at the time.
Why not?

We would like to add a codicil that every taxpayer gets to participate in a lottery to attend at least 1 home game out of the 80 to be played in the next decade. After all, they are already helping to pay for it through their tax dollars. There are 73,000 seats in the stadium.  Everyone who helps pay for the improvements through their property and other local taxes should at least have the chance to go to one NFL football game in their lifetime to cheer 'their' team on to victory. Shouldn't they?

Otherwise, we think that Bank of America would be more than willing to loan $125 million to refurbish the stadium with their own name on it, wouldn't you? The Richardsons are more than credit-worthy and BofA, well, this might be one of the safest loans they could possibly make after the trials and tribulations they have experienced over the past few years with the mortgage markets. Especially when Cam Newton takes the Panthers to their first Super Bowl trophy in a couple of years.

We think private enterprise should be 'private enterprise'.  Our government money should be used for the basic necessities of protecting our freedom and safety and providing for the infrastructure that makes our country the envy of world history. We would include public education in that 'infrastructure' since Thomas Jefferson believed that 'an uneducated populace is a danger to the existence of a democratic republic' in so many words over thousands of letters during his lifetime.

We think Mr. Richardson and the Panthers management are honorable people. We think they know what the right thing to do is..they have already done it before with the invention of the PSL back in 1995.

Hopefully they will see that the 'right thing' is not to stick it to the Charlotte taxpayers just because 'everyone else does it'. If they want to be like 'everyone else', then that is indeed a sad day for Charlotte and free enterprise.

Even if the NFL is not really 'free enterprise' given its many monopolistic and oligopolisitic advantages given them over the years from various Congresses. Which is further reason not to further saddle taxpayers with the burden of paying for their operations and upkeep.

Tuesday, January 22, 2013

Are Health Care Costs (Shudder!) 'Moderating'?

'Happy Days Are Here Again...Maybe?'
Medical care observers in Washington are popping champagne lately over some data that seems to indicate that health care costs have 'flattened' out in the last couple of years. Is it possible that health care costs have 'moderated' down significantly from the stratospheric triple-the-annual-rate-of-inflation we have seen in America for the last several decades?

Maybe President Obama read these reports before giving his 2nd inaugural speech yesterday.  Why else would he so adamantly stand fast against any sort of Medicare reform?

Stuart Butler of the Heritage Foundation wrote a recent article exploring whether this was possible or not and came to the conclusion that 'the jury is still out on this'.

Our gut feeling is that with a rapidly-aging Boomer generation now about to hit the highest medical period of their lives; no significant changes to tort reform and other cost drivers inherent in health care nationwide and a vast expansion of health care coverage under Obamacare, there is about as much chance that health care costs have suddenly 'moderated' as President Obama will become known as 'The Hammer' when it comes to controlling federal spending in his second term.

As Mr. Butler notes in his article, we have seen such plateaus before, most notably when America went through the HMO Boom of the '90s which 'worked for awhile'...and then health care costs exploded again for the last decade.

We think that the Great Contraction in the American economy has put the squeeze on many people who either can't afford health insurance or medical care any longer since millions of people have been out of work for all or part of the first Obama term. They might be holding back as long as they can with some medical problem they might have which means it will only be more expensive to treat later.

We also think that there must be some marginal health care operators who have cut their prices in order to hold onto business just like every other business in America has done in order to stay in business. Health care costs are not totally immune to the overall health of the economy anymore than any other product or service in America.

However, just to show you the inordinate impact that overall health care inflation has on our federal budget, debts and deficits, we have put together this chart for you to take a look at and ponder: (the link will be more clear and easy to read)

We have updated the chart to take into account the loss of revenues signed into permanent law by President Obama as a result of the most recently-concluded fiscal cliff 'deal' (sic) passed by Congress earlier this month.

You will note, just for the record, that cutting taxes in the fiscal cliff will cause the reduction of revenues in coming years. Cutting taxes reduces tax revenues. That is why you cut taxes in the first place: so people will pay less taxes!

There might be some increase of income tax revenues when economic growth exceeds 3%, if it ever does again. Enhanced tax revenue collection over previous expectations comes from more people working and paying payroll taxes, first and then in income taxes if they are in the higher-income brackets, that is.

However, most of the surge in overall tax revenues to the federal treasury that first occurred under President Reagan and then swelled under Bush 41, Clinton and W to over $200 billion/year came from the 1983 Social Security Act which raised payroll tax rates beyond what was needed to pay current benefits. This is known as the so-called 'Social Security Surplus' which has just about vanished in the last 4 years due to this crushing recession.

For now, however, let's all agree that making the Obama tax cuts permanent reduces tax revenues relative to the previous baseline, almost exactly by one year as evidenced by the above chart.

Once you plug in the loss of revenues from the fiscal cliff deal, which increases our national debt accumulation by close to $3.5 trillion over the next 9 years all by itself, you'll see that under the optimistic CBO projections, future deficits are projected to hover around between $486 billion and $719 billion for the same period of time (dark-blue shaded line)

We say 'optimistic' because CBO estimates that economic growth will average 6.5% per year on a nominal basis from 2014-17 (4.3% on a real inflation-adjusted basis) and an average of 4.5% per year on a nominal basis from 2018-2022 (2.4% on a real inflation-adjusted basis)

Based on the headwinds we know we are already facing American business from the first term of the Obama Administration with more to come in his second, we have heard economists predict that we are stuck in a 2%/year annual real inflation-adjusted growth rate range for the rest of our lives! So we are not betting on the CBO revenue projections here either.

Take a look at the bottom group of figures associated with Medicare/Medicaid marked 'w/3% annual growth' (light blue line). If indeed excessive health care cost inflation's back has been completely broken as hoped for and possibly indicated in CMMS report referred to in Stuart Butler's article, our deficits will plummet and possibly be as low as $162 billion in 2022.

All by itself without any changes to any other federal program. Just because health care inflation falls back into line with 'normal' inflation rates in the rest of the economy.  Amazing, isn't it?

Any sort of uptick in reasonably robust economic growth between now and then would get us out of this death spiral of pilling $1 trillion+ debt levels upon each other as America has done like stacks of wood for the past 4 years. The question then would be should we continue to pay off debt for a considerable length of time or will Congress and the next President go on a spending spree like they won some sweepstakes at Neiman Marcus or something.

This points out very clearly that the largest part of our debt problem has been caused by our inability to rein in health care costs for the past 20 years which is very clearly a 'spending' issue, not an under-taxation problem as President Obama and the left seems to believe. Remember: these projections were made with the REDUCED revenue projections under the fiscal cliff tax cuts being signed into law.

Which brings up a pretty interesting question: IF we can save close to $550 billion in 2022 alone due solely to lower Medicare and Medicaid costs in that one year, will the Paul Krugmans of the world who love more government spending object? If health care inflation is only 3% per year for the next 9 years, that will reduce federal spending by close to $3 trillion over that time period!

Over $3 trillion of directed federal spending by Washington and the state capitals will have 'vanished into thin air' over the decade to come. What will a lover of more government spending do then?
A Great Economic Future?

Would that be a 'good thing'...or a 'bad thing' for the US economy?

It would be a monumental victory for the American people and our children and grandchildren. $3 trillion in less debt; balanced budgets again. Why, people around the world will start to believe that America has got its act together once again!

Our children might be able to see some light at the end of the tunnel and not wonder if it is a locomotive heading their way.

We'd like to hope and believe health care cost moderation is true. We are not counting on it yet though. Not by a long-shot.

Thursday, January 17, 2013

When Is 'Compromising' Not 'Compromising'?

We have a serious problem in America today.

Many Americans on both ends of the political spectrum think 'compromise' is a 4-letter word.  It is clearly not. There are 10 letters in it last time we counted.

Beyond that mere formality, the whole concept of 'compromising' is met with disdain and scorn by activists at both extreme ends of the political spectrum.

The rest of the nation? They think our elected leaders in Washington are flat-out 'crazy' for not cutting deals and fixing what ails us as a nation. 32% of them in North Carolina alone are now officially registering as 'Not Democratic' and 'Not Republican' as they sign up as Unaffiliated/Independent voters and that number is rising by 8% per year.  What does that tell ya?

Let's try to look with clear eyes at what President Obama is doing to appease the ardent activists on the left and what the GOP is doing to appease the ardent activists on the right:

President Obama gives scant lip-service to 'balancing the budget', in our humble opinion, and never advocates passionately for anything conceivably possible that could actually get us there. 'Sticking it to the rich' as he achieved in the fiscal cliff deal might raise $600 billion over the next 10 years, assuming every rich person is dumb enough to not hire the best tax lawyers and accountants to shelter their income from these new higher taxes.

That might be about $60 billion/year max. Maybe. Congratulations, President Obama! You may think you have solved a big part of the problem but you have only covered about 6% of the projected deficits per year for the next 4-5 years at least. You are going to have to find 94% more somewhere to ever take a whiff of a balanced budget before your forced retirement in 2017.

He said he was 'going to cut the deficit in half by the end of his first term!' during his surprising run out of seemingly nowhere in 2008 right smack dab into the White House. Guess what? He failed.

Let's see what he has actually been willing to do to forge a comprehensive 'compromise' with the Republicans. Keep in mind that for most of American history, a 'true' compromise has meant that you would be willing to give up some or a lot on your side in order to get something bigger or greater for the common good for the nation as a whole.

The best compromise? 'No one is 100% happy with everything in the deal and everyone goes away grumbling about some part of the agreement..but they got a deal done that is best for the entire nation'.

We haven't had one of those on a budget deal on large bi-partisan basis since the Budget Act of 1997. Think about and see if you can come up with a better one.

President Obama 'agreed' to raise taxes 'only' on the top 2% of Americans. Whoop-de-do. What a brave, courageous thing to do! That is almost as 'brave' as Hollywood actors congratulating Julianne Moore at the Golden Globes for portraying Sarah Palin in the movie 'Game Change' recently when the left mercilessly beat up on her in 2008.

Left-wing uber-liberal activists love it:  'More taxes on the greedy rich!'. 'No cuts in spending on any federal program!. At. All!'.

The $1 trillion in spending cuts that he trumpets that he has implemented or proposed are extremely back-end loaded in years 2018-2022, long after he leaves office in 2016. They also include a highly dubious massive reduction in 'contingent emergency funds' that strike us as being ephemeral at best. Along the lines of reducing future 'authorization' levels, not actual appropriation levels simply because you can't appropriate funds more than 2 years in the future in each Congress.

'Fairy powder and pixie dust' you can call those 'savings' put forth by President Obama.

No concessions on entitlement spending. No increases in retirement ages for SS and Medicare which would basically 'break the back' of upward spending trends almost all by itself. No serious spending cuts to speak of at all.

So. Has President Obama 'compromised' in any meaningful way on the budget. 'No', says the computer.

Let's look at the Republicans. What sort of things have they 'compromised' on in the budget?

In the most recently-concluded 'fiscal cliff avoidance' deal, the Republicans who voted for it with the vast number of Democrats to get it over the top basically agreed to allow taxes to go up on the top 2% of all taxpayers in return for what? Higher retirement ages for SS and Medicare? Radical cuts in entitlement programs, the largest components of the US federal budget today and where all the growth is in the first place?

Nope.  They did get the 'permanent' extension of the vast majority of the Bush tax cuts that President Obama and the Democrats have railed against for the past 10 years as being 'so terrible!' for the US economy and which 'caused all the problems on Wall Street!' and 'acne and eczema on all our children!' and other such nonsense.

The dreaded AMT was indexed for inflation (good) and the rest of the Bush tax cuts have now officially become the 'BushObama' tax cuts for all history to remember since President Obama now 'owns' them as much as George W. Bush 43 ever did.  In fact, more so since President Obama made them 'permanent'.

So to recap: Obama got the higher taxes he wanted on the 'greedy top 2% of the rich folks whom he said weren't paying their 'fair share' before somehow. Republicans got permanent extensions of most of the Bush tax cuts they wanted. Obama got more spending.

The American people got far more debt, deficits and spending for the future. Not less.

What sort of 'Grand Compromise' is it when both sides basically get to do the following?
  • Suck up to the middle-class and tell them that 'I kept your taxes from going up!'
How 'brave' is it when Congress and the President get to play Santa Claus and hand out tax cut goodies like they are chocolate candy and cream puff pies?

We think you and every elected person in Washington needs to read this book: 'Henry Clay: The Essential American' by Daniel and Jeanne Heidler of Texas A&M University.

The subtitle of the book is the mind-bending phrase: 'The Uncompromising Compromiser'.

What the heck does that mean?

Our elected leaders from President Obama on down would do well to draw from the lessons of Henry Clay in this book as well as the great film 'Lincoln'. (you really should go see it)

What they will learn is that there is a huge difference between having higher lofty over-arching goals for the nation as a whole (what we are, what we want to be, how we want to live) and having smaller political targets you want to achieve in any particular session of Congress.

Having a safe country in which to live in without rampant inflation, massive unemployment and unrest and revolution in the streets is a 'lofty over-arching goal'. Not cutting entitlements and not raising taxes are short-term political objectives in each session of Congress to help incumbents 'win the next election'.

Henry Clay 'got that'. Abraham Lincoln 'got that'.

Not to equate Bill Clinton with any of those two giants in American history, legend and lore, but he 'got that' as well when he signed the 1997 Budget Act with the dastardly GOP leadership, Newt Gingrich, Dick Armey and Tom Delay whom we know he did not like very much at all...and they didn't like him either.

The over-arching goals that Henry Clay was always working towards were these:
  1. A cohesive America where the west was integrated fully into the United States
  2. A high-quality system of roads and canals that would bind the young Republic together and not splinter into Balkan-like states and
  3. Avoidance of any civil war that would tear the new Republic asunder.
He achieved all three goals during his lifetime. He died trying to avoid the Civil War which came 9 years after his death.

Was he a spineless 'compromiser' who violated his basic beliefs and principles in his numerous deals he cut in the US Senate? Or was he a 'principled statesman' who did whatever it was necessary to keep the United States of America free, safe and whole during his long years of selfless service to the nation?

Henry Clay 'won' on all the big points he wanted to achieve.  How can he possibly be known as a 'spineless loser'?

We are facing a time of enormous consequence in our nation's history. We are going to have to either take the many positive steps necessary to get our fiscal house in order towards balance and much lower federal debt to get our economy rolling again or else suffer the consequences.

If we are not going to take the necessary steps today, we are going to be trapped in this amber of slow growth and high unemployment like those mosquitoes you see in fossilized tree resin from hundreds of millions of years ago.

Maybe we'll see a dose or two of 12% inflation like we experienced in 1979-80 under President Carter not so long ago as well. Won't that be fun?

It won't matter a whole heckuva lot to future archaeologists or paleontologists if President Obama protected American entitlements to the hilt in 2012 because the AARP told him to do. It won't matter to them that the GOP fell on their swords for Grover Norquist all the time either. They might just see the remnants of a nation that used to be responsible, had its act together and almost always 'did the right thing'.

The tax issue got settled 3 weeks ago. The GOP should 'declare victory in Vietnam' on that score since they did get the permanent tax extensions.  They should move on to forcing Senate Democrats to the table on spending cuts and leave President Obama completely out of it from now on.

This is a fight that Henry Clay would have welcomed as would have Abraham Lincoln. Great Leaders want to do the best they can for the nation as a whole, not just for their individual political careers which diminish over time if they never do anything brave or worth writing home about.

It is time for our elected Representatives and Senators to do something to write home about. So far, for the past 12 years on spending restraint, it has been a big, fat zero goose-egg.

Friday, January 11, 2013

A Trillion-Dollar Coin? Seriously?

'Give me your tired, your poor, your debt....'
Senate Democrats and President Barack Obama and others on the national scene and in Washington are giving serious consideration to issuing a $1 trillion coin in the event that the debt ceiling becomes a major point of contention in the next several weeks with House Republicans.

Which it will. You can count on that.

Seriously.  A group of 4 US Senators in the World's Greatest Deliberative Body sent a letter to President Obama today basically saying they have 'got your back, Mr. President!' to do 'anything possible' to avoid any discussion on spending cuts in advance of the next debt ceiling debacle.

'Doing anything possible' presumably includes issuing this cockamamie $1 trillion coin. Since it is in the news, people in the know must be talking about it and leaking it to the press, right?

We have zero expectation that President Obama will take the lead as President to reduce overall levels of spending one iota over the next 4 years. He just doesn't have it within his psyche and political philosophical makeup to see where any reduced concentration of power and spending from Washington is a 'negative' thing.

You didn't see too many battles over the debt ceiling from 1998-2001, didja?  You know why? Because we were paying down debt at the rate of several hundred billion per year with surplus revenues a booming economy was generating after the Republicans in Congress negotiated a deal with Erskine Bowles of the Clinton White House to hold spending down to about 2% annual growth.

What is almost sad and funny (if it were not true) is that the whole idea of a $1 trillion coin came off a website that some guy known as 'Beowulf' wrote as a joke one day in 2009.  Here's the story, read it for yourself: $1 Trillion Coin.

'Amy, what should I do about war?'
'I wonder where the Widow Hen is?'
This would be like President Jimmy Carter getting advice on nuclear disarmament from his 10-year old daughter, Amy in the White House.

Worse, it would be like recently-named 'Father of the Year' (Chelsea is 32 for Goshsakes and married!) Bill Clinton getting advice on being 'politically correct' from Foghorn Leghorn. Or...well, you can make up any absurd comparison you want.

This is so comical that it should be a cartoon. What happens if the Treasury Secretary somehow uses the coin to buy a Coke or something? How about if he is walking to Metro one day and it falls out of his pocket through the grate down into the Metro? Or tips his cab driver in Washington with it...what then?

This doesn't 'create more debt'. This would 'create more money', out of thin air.  Just like the Fed has done for the past 4 years each and every time they have 'expanded the Fed balance sheet' and bought more non-performing mortgages and loans from distressed Americans and banks.

Which, now that we are mentioning it, is just as scary as issuing this crazy $1 trillion coin, isn't it?

Everyone knows what happens when you 'create more money', don't you?  Right. Inflation, the most wicked and dangerous weapon against older and lower-income and poor people the world has ever known.

In 1978 when we got out of college, America was about to head into one of the worst inflationary upwards spirals in our modern history. 21% annual inflation around 1980/81. We took a course in business school called 'inflation-accounting' if you can believe that where everyone had to learn how to account for the almost 1%/month increase in supplies and materials that went in to making any product back then.

Inflation is just plain bad, no matter how you cut it.

Lycurgus, the first king of Sparta, wanted to take the aristocracy and pecking order out of the utopia that he wanted to see, the Spartan nation. He confiscated the gold and silver coinage of all of his subjects and replaced it with iron. No doubt he doubled the amount of iron coins in circulation anytime he had to pay off debts for a recent war or two he incurred. That is the tried-and-true way rulers in the past have resorted to pay for the debt they have built up when they have spent way above what they take in in tax revenues.

Just talking about the $1 trillion coin in public shows how clownish our elected leaders have become. Tell them to stop and quit voting for them!

Tuesday, January 8, 2013

'We Don't Have A Spending Problem, John!'- President Barack Obama

President Obama Economic/Budget Advisor
You might want to sit down for this one and take some Dramamine. You are going to need it.

During the most recent fiscal cliff deliberations, President Barack Obama, 44th President of the United States of America and most recently elected to serve a second term by 50.9% of your fellow citizens, actually said these words to Speaker of the House John Boehner according to an article by Stephen Moore of the Wall Street Journal:

'We don't have a spending problem, John!'

When Speaker Boehner persisted, the President got agitated and said these following words:

'I'm getting tired of hearing you say that.'

What planet or parallel universe has President Obama been living on or in the past 4 years? This borders almost on the Peter Pannish-level of 'Neverland' where all you have to say is: 'I won't grow up!'... and you don't.

For roughly the past 40 years, budget experts on both the right and the left have acknowledged that the US is on an unsustainable spending path that simply can not continue. About 20 years ago, we distinctly remember hearing economic and budget experts testify before the House Budget Committee and say this in various and sundry ways:
'The American people will not allow too much debt or too much spending to occur, however. They are simply not that stupid and reckless to allow it to happen'.
They were all wrong, weren't they? As you can see from the following chart, and President Obama could easily see if he ever read one, defense spending is up 70.5% since 2001; non-defense, non-entitlement spending is up 60%; Medicare and Medicaid are both up close to 76%; Social Security is up 38% and 'other spending' is up 64%.  All during a time when inflation was generally tame and the CPI is up 28% total for the nation.

We American citizens have allowed it to happen and not punished our elective leaders for spending over $16 trillion more than they have allowed to be collected in tax revenues. Both Republicans under Bush 43 from 2001-2007 and Democrats under Obama from 2009-2011.

In their stated zeal to: A) 'not ever raise your taxes' and/or B) 'protect every single penny of your Social Security/Medicare bennies!', all everyone in Washington has done over the past 12 years is this: 

'Increased our collective publicly-held national debt levels from 35% of GDP in 2000 to over 70% of GDP today and climbing steadily higher to what many believe to be dangerously high levels that any sane society would be prudent to avoid'.
The twin siren calls of lower taxes for (most) everyone and higher federal government spending for (most) everything under the sun in America from undeclared wars to welfare to education, environmental protection, roads, space travel and entitlements has proven to be too much to resist from elected officials on both sides of the political spectrum.

Is it even possible for anyone, including President Barack Obama, to assert that 'we don't have a spending problem' in America today?

We will try to be charitable but still count the ways that this is simply beyond the pale of plausibility for any sane person and debt-denier to say.

Let's presume that we had been in a 'normal' economy for the past 4 years, not the recession-laden one we have all experienced. Perhaps, just perhaps, that if we had not had the Great Recession, we might have a GDP approaching $18.2 trillion today instead of around $15.8 trillion, a drop of 13% from 2007 projections. Our level of federal spending of $3.7 trillion would approximate 20.3% of GDP instead of the over 25% of GDP it has been virtually during the entire Obama Presidency. So far.

That would not be so bad, would it? In fact, that would be terrific! 18.5% of GDP in federal spending has been the dream of every budget hawk that has ever worked on or even looked at the US federal budget. A few spending changes and reforms and the level of federal spending would be close to what it was during the vaunted Golden Age under President Bill Clinton that President Obama always brings up in his public pronouncements.

The problem is that not only have we had a crushing recession, we are now looking at substandard historical growth in the US of around 2% or less for the rest of our lifetimes!  Consensus GDP growth rates ranged from 3.5-4% per year in 2006 for the next decade. Now, many economists expect 2% annual growth, a difference of between 1.5-2% per year for a long, long time.

Every time we raise taxes or increase our national debt, economists predict another .1% or .5% or 1% of GDP gets shaved off of potential growth.  Right at a time when we need more economic growth, not less.

If every single discouraged worker who has left the workforce over the past 4 years due to lack of success in finding a job re-entered the job market tomorrow, the unemployment rate would skyrocket to over 11.5% according to most independent economists and forecasts. That is not good.

So continue to be a debt-denier all you want and try to pooh-pooh the deleterious effects of both higher taxes and increased debt on the American economy. The facts are that both higher taxes and more debt push down the chances for a robust recovery, not increase them.  

Right now, we have a President in the White House, President Barack Obama just to be clear about who it is, who is in complete denial about the need to rein in spending. Instead, he is enamored with spending far more, not less at the federal level which means more taxes and more debt, not less. 

The heck of it is that all fiscal conservatives and responsible budgeteers want is modest reforms and reductions to projected growth rates in the future, not a wholesale slashing of current fiscal year spending. Instead of federal spending growth rates in the 5-6% annual range, we would like to see it grow at 2.5% per year overall and be more in line with the reality of inflation expectations.

Two areas in the US economy with higher growth rates than the federal budget? Health care and higher education, both compounded at 2-3 points higher than the inflation rate annually for the past 25 years.

There is hardly a case in recorded history over the past 800 years where high taxes and exorbitant debt in any sovereign nation turned out real well for the perpetrators.  As in 'none' according to liberal economic historian, Ken Rogoff of Harvard University.

We don't have an $20 trillion GDP economy today. We are very unlikely to have one under President Obama's second term either according to CBO economic forecasts which are 'generous', to say the least. Given current economic prospects and the headwinds set up by the very President who should be trying to encourage economic growth, we are more likely to see stifled economic growth instead.

'Washington: We Have A SPENDING PROBLEM!' 

What part of that is so hard for President Obama and Nancy Pelosi and Harry Reid to understand?

Saturday, January 5, 2013

'Thank You, Young American Taxpayers Who Voted For Obama!

We got an email from a friend of ours who said he had an epiphany post-election recently.

He says it suddenly occurred to him that every young person who voted for President Obama for a second term saved him a lot of money and will prevent him from having to sacrifice very much personally for the good of the nation as a whole.

'How is that?' you might quizzically ask as you scratch your head. 'President Obama has promised to make older rich people 'pay their fair share!'

Well, he got his wish in the fiscal cliff drama just concluded.  The rich are now officially 'paying their fair share!' (whatever that means). He stood in the doorway defending every single line-item of spending at the federal level and, get this, asked for more spending, not less.

Every older person above the age of 50 should be part of the Grateful Nation now, right?

Here's the core message of the email our friend sent to us, slightly (mostly) embellished by us to make the following point:
'The young people of this nation who voted President Obama in for a second term have just hurt their own selves when it comes to setting up a better, more economically healthy future for themselves and families they hope to have one day.
We'll show you what we mean with our friend's transcript of conversations he has had recently with young Obama supporters:
'You vote for Obama?' he asks any young person willing to engage a little civil discourse about the most recent election.
"Yea, isn’t it terrific?” responds the young person.
'Well, I worked for Romney and was depressed he lost. However, after thinking about it a little more in-depth, I just want to thank you'.
“Thank me? For what, you lost!”
'I just want to thank you for your sacrifice and generosity.  It has really touched my heart.
“What do you mean?” the young person always says.
'What I mean is thank you for all the free stuff you have now allowed us to keep for ourselves for the rest of our lives'.
'You see, many of us older people, especially those of us for whom America has provided great opportunities to succeed over the past 40 years and who are over 50 today, voted for Romney and were willing to make some sacrifices right now in 2013.
We were willing to make those sacrifices now for the good of the nation and not punt it down the road like was just done in the fiscal cliff debacle. You know, less tax deductions for higher-income, higher net worth individuals, less health care subsidized by you, the young taxpayer, to balance the budget and reduce the deficit so you and your friends wouldn’t have to pay for it for the rest of your natural-born days here on Earth.
It has truly touched all of our collective hearts that you didn’t want that for us, your parents and the older generation who helped ring up all these debts in the first place.
You decided that you wanted to pay for it all yourself!
So again thank you on the behalf of a grateful aging Boomer Generation!'
He didn't tell us how every conversation ended.  We think it must be one of those 'thud' types of endings you see in cartoons or in the movies, though.

Here are the types of things the older generation who voted for Mitt Romney pretty much have agreed need to happen to make sure the next generation has the same opportunities as we have for the past 40 years:

1) Non-poverty-level soon-to-be seniors would have to work for a year or two more before becoming eligible for full Medicare benefits.  Right now, they become eligible for the full 85%-subsidized-by-the-younger-taxpayer Medicare program the second they become age 65. 85%.

Thank you,Young American Taxpayer!

2) Non-poverty level soon-to-be seniors would have to work a little longer to become eligible for full or reduced Social Security benefits. Right now, they can retire at age 62 with reduced benefits, age 66 with full benefits. The current law schedule raises the SS retirement age to 67 in 2027. Why not raise it to 67 by 2017?

Thank you, Young American Taxpayer!

3) Older Americans who voted for Mitt Romney were willing to support a line-by-line examination of the entire federal budget in 2013 and allow his investment banking skills to recommend which programs needed to be reformed or expunged entirely.

We have pointed out hundreds of programs that need to be reviewed and reduced over these past 4 years on these can click on most any one of them in our archives and pick out several you would want to see eliminated as well. Since we benefit from the largesse of many of these massive programs either personally or in our business lives,

Thank You Again, Young American Taxpayer!

And the tax deductions, tax expenditures and tax shelters! Most of those go disproportionately towards the wealthy and the well-off! You young renters out there, thanks for letting the mortgage interest deduction for the mega-mansions go virtually untouched while you continue to get no deductions for your rent payments each and every month.

We older folks thank you young Americans who voted for Barack Obama, once again.

You get the point. We had the golden, platinum-plated chance to make a serious dent in the accumulation of future deficits and debt in the now-concluded fiscal cliff negotiations. The debt not solved will now become the burden or the millstone around the necks of the millions of young taxpayers who voted for President Barack Obama on November 6, 2012. He has confirmed at the edge of the fiscal cliff what most people have thought true for the past 4 years: President Obama is simply not serious when it comes to budget and fiscal matters and especially when it comes to reducing federal spending...anywhere in the budget.

But now, most of the older generation can rest easy.  The Young Taxpayer has made it possible for us to live out the rest of our lives without any personal sacrifice since President Obama won't support cutting any program we benefit from, including Social Security and Medicare.

We should be rejoicing and dancing in the streets, shouldn't we?

We are not.

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Tuesday, January 1, 2013

The Greatest 'Punt' in History

No, it wasn't the 79-yard punt by Duke punter Will Monday in the 2012 Belk Bowl in Charlotte, North Carolina, although that was pretty darned great, you gotta admit.

No, the greatest 'punt' of the recent college bowl season was performed collectively in a three-legged kick down the road by President Barack Obama, Senate Majority Leader Harry Reid and House Speaker John Boehner on New Year's Eve in Washington, D.C. in the Fiscal Cliff Bowl Sponsored by The AARP, Grover Norquist and The American People.

We are talking about the 'deal' that you are going to hear a lot of bleating and chest-beating about over the next several weeks and months.  The one that is supposedly going to 'avert a recession!' and 'make the rich pay their fair share!'

If Will Monday's punt was spectacular, the fiscal cliff 'punt' by our elected leaders to kick this problem down the road was even longer and tip-toed along the sidelines even further.

Let's look at what was accomplished versus what is needed to solve our fiscal dilemma:

1. President Obama has finally achieved his dream of sticking it to the rich and making them pay their 'fair share' of the tax burden.  Congratulations, Mr. President!  You have just guaranteed that this is the last time for the next 20 years that ANY Republican will vote for ANY tax increase.

2. Why? Simply because the GOP got no spending cuts in return for their vote to raise these taxes! None, nada, zero. In the past, the GOP was at least 'promised' a 3-to-1 or 2-to-1 spending cut/tax hike ratio.  This time, it was nothing.

The GOP did get a 'promise' from President Obama to talk about the $109 billion in sequester cuts 2 months from now in early March or right about when we will see another fight over the extension of the debt ceiling again.

Who negotiated this deal, Mephistopheles or Faust himself?

Usually, in any deal that involves any pain, both sides have to give equal amounts of skin and certain cherished body parts to complete the compromise. President Obama gets to crow to his crowd that he has finally 'made the rich pay their fair share' so he can check that off of his campaign promise list. Warren Buffett will be happy and all the stars and starlets in Hollywood and the Silicon Valley can start paying more taxes since they supported President Obama.

(We would love to see any of their tax returns for the next 10 years to see if they actually do pay $1 more in taxes or if they just hire better tax lawyers and accountants to shelter their income. Just as they are doing today and have done so for centuries)

3. For those of you who are keeping score at home, this 'deal' will:

  • Raise revenues by around $600 billion between now and 2022 (maybe)
  • Cut zero spending except for a piddling $24 billion (maybe) to pay for the two-month delay in the sequester that was supposed to kick in today and cut $109 billion in defense and domestic spending
  • Raise spending by $30 billion to pay for more unemployment benefits for another year because this economy just will not respond to anything this Administration has proposed or passed
  • Restore Medicare cuts of $31 billion to pay for doctors to keep seeing Medicare patients which was dishonestly used by the Obama Administration to 'pay for' (sic) Obamacare when passed in 2010
If you can add and subtract unlike the Mensas now in charge of our government in Washington, that means we have raised taxes by $600 billion to arrest the probable increase of $7 trillion+ in new federal debt between now and 2022 plus raised spending by another $37 billion for 2013 alone.

This is 'fair and balanced' as President Obama characterized it in a press conference recently?  Are you kidding the American people, Mr. President?

If this is not proof that we desperately need new leaders to come out of the private sector to replace all the incumbents in the White House and Congress, we don't know what else we can tell you. 

Of course, we just had the chance to replace this inept President and the American people just sent mostly everyone back to the White House and Congress 2 months ago. 

'You reap what you sow' is the old adage from Galatians 6:7. 'We will reap what we have sown'.

There is only one way to guarantee that no more damage will occur and that federal spending will not increase at about 3 times the rate of inflation this year: 

Speaker Boehner should open and then immediately adjourn Congress for the year.

It is worth paying each Member of Congress and the Senate $178,000 for the year and the President $400,000 to do absolutely nothing at this rate. Pass a continuing resolution at last year's levels and the federal budget will balance by itself in 2017.  Honestly.  You can look it up on the CBO webpage yourself by looking at their budget porjections.

Normally, great Presidents are able to marshal the disparate factions of both parties and both sides of the Capitol to do something great for the nation in times of distress. If the 'fiscal cliff' couldn't force them to act like grown-ups and get something positive done for the people of this nation, what else will?

This is an embarrassing moment for the American democratic republic.