Congress and the Obama administration continue to move forward with economy killing legislation such as Cap & Trade, Health Care Reform and Card Check legislation, to name a few. The gorilla in the room that no one wants to talk about is the massive deficit being forced on future generations.
The way Michael Whalen of the National Center for Policy Analysis figures it, the national debt is $11 trillion, but there’s also $107 trillion in unfunded entitlement liabilities for a total of $118 trillion, more than eight times the gross domestic product. More ominously, the Federal Reserve Board says federal liabilities are 2.3 times America’s total private net, which is just $51.5 trillion. “Ask any accountant, banker, or anyone remotely familiar with simple accounting knowledge if we can service this debt, and the collective answer is a resounding ‘no.’ Any business with these ratios would be a complete basket case, hopelessly bankrupt.” Hence, the headline on Mr. Whalen’s Washington Times op-ed Aug. 11: “We broke the bank.”
This is by far the greatest problem that our country will be facing, assuming that our economy and country can survive this onslaught of Socialist Programs. How much of the Federal Budget can be spent on debt repayment as our economy continues to shrink?
In other words….”I’m sorry Mr Geithner , based on your current situation, we can not approve your loan at this time. Feel free to visit Beijing again when your situation improves”.
The United States is functionally bankrupt. Our collective capacity to deal with this astonishing fact is seemingly nonexistent. Our national politics have become show business, exhibiting a complete refusal to strategically respond to this reality.
Even if we significantly slash the federal entitlements by half, we cannot fix this problem. Even if we increase federal receipts from the 50 year average of 18 1/2 percent of GDP to say 27 percent, killing private-sector growth, we cannot fix the problem.
Perhaps President Obama is planning on a fast track bankruptcy for the federal government, just as he did for General Motors and Chrysler. The result would be SEIU (Service Employees International Union) making the decisions for Congress and ACORN running the Treasury.
America has become more of a welfare state than most of us would care to admit as Robert Samuelson details in a recent article. The shock to many will come when it becomes obvious that the promises made by Government are so large that they simply cannot be kept.
Washington Post - Raised in an individualistic culture, Americans dislike the concept of the “welfare state” and do not use the term. But make no mistake, the United States has a welfare state, and its future is precarious. The true significance of General Motors’ bankruptcy lies more with this welfare state than with the battered condition of American capitalism.
Broadly speaking, the U.S. welfare system divides into two parts — the private, run by firms; and the public, provided by government. Both are besieged: private companies by competitive pressures; government by rising debt and taxes. GM exemplified the large corporation as private welfare state. In contracts with the United Auto Workers, GM promised high wages, lifetime employment, generous pensions and comprehensive health insurance. All this is ancient history: New workers get skimpier benefits.
What most Americans identify as government “welfare” are payments to single mothers, food stamps and (perhaps) Medicaid, the federal-state health insurance program for the poor.
But that’s not the half of it. Since 1960, government has changed radically. Then, 52 percent of federal spending went for defense, 26 percent for “payments for individuals” — the welfare state. By 2008, 61 percent consisted of “payments for individuals,” 21 percent for defense.
Social Security and Medicare — programs for the elderly — represented the biggest share: $1 trillion in 2008. Most Americans don’t consider these programs “welfare,” but they are. Benefits are paid mainly by present taxes; there’s little “saving” for future benefits; Congress can alter benefits whenever it wants. If that’s not welfare, what would be?
In theory, expanding public welfare could offset eroding private welfare. President Obama’s health-care proposal reflects that logic. The trouble is that the public sector also faces enormous cost pressures, driven by an aging population and rising health costs. The Congressional Budget Office projects the federal debt will double as a share of the economy (gross domestic product) to 82 percent of GDP by 2019.
Any sober examination of figures like these suggests that the system has promised more than it can realistically deliver. We are borrowing not to finance investment in the future but to pay for today’s welfare — present consumption. Sooner or later, the huge debt will weaken the economy. Nor would paying for all promised benefits with higher taxes be desirable. Big increases in either debt or taxes risk depressing economic growth, making it harder yet to pay promised benefits.
Politicians for the most part do not understand basic finance and they get elected based on who promises the most, regardless of the ability to pay. Do not expect things to change until America’s overextended credit line is cutoff.
President On A Roll
It seems as if the President is enjoying an extended honeymoon with both the press and voters, while the Republicans remain disarrayed and powerless. Public optimism and confidence is surging based on the hope that the steps taken by the Obama administration will lead to brighter economic days. The voters and Congress have effectively given the President what almost amounts to dictatorial powers.
The Obama infatuation is a great unreported story of our time. Has any recent president basked in so much favorable media coverage? Well, maybe John Kennedy for a moment, but no president since. On the whole, this is not healthy for America.
Our political system works best when a president faces checks on his power. But the main checks on Obama are modest.
The study examined 1,261 stories by The Post, the New York Times, ABC, CBS and NBC, Newsweek magazine and the “NewsHour” on PBS. Favorable articles (42 percent) were double the unfavorable (20 percent), while the rest were “neutral” or “mixed.” Obama’s treatment contrasts sharply with coverage in the first two months of the Bush (22 percent of stories favorable) and Clinton (27 percent) presidencies.
The infatuation matters because Obama’s ambitions are so grand.
The press has become Obama’s silent ally and seems in a state of denial. But the story goes untold: Unsurprisingly, the study of all the favorable coverage received little coverage.
Unlimited power allows one man to accomplish what could not otherwise be done with a gridlocked political system, but also allows for potentially unwise policy decision implementations that may have dangerous long term consequences. Our basic governmental structure of checks and balances seems to be in peril. Here are some more thoughts on this matter.
American Capitalism Gone With A Whimper
It must be said, that like the breaking of a great dam, the American decent into Marxism is happening with breath taking speed, against the back drop of a passive, hapless sheeple, excuse me dear reader, I meant people.
The final collapse has come with the election of Barack Obama. His speed in the past three months has been truly impressive. His spending and money printing has been a record setting, not just in America’s short history but in the world. If this keeps up for more then another year, and there is no sign that it will not, America at best will resemble the Wiemar Republic and at worst Zimbabwe.
Obama Led the US Economy Into a Fiscal Trap Containing a Monetary Time Bomb
The majority of Americans elected an arrogant and bumbling ideologue to the presidency and so the rest of the world — little Israel in particular — will have to pay the price. However, Economics is what invariably brings the Obama’s of this world undone.
Despite the bitter lessons of history — a subject that Obama is as deeply ignorant of as he is of economics — he does not really believe in the existence of economic laws. Let us not forget that this is the same man who thinks he can regulate bubbles out of existence, even though he and his cronies are totally ignorant as to the origin and nature of this economic phenomenon.
Obama and his brilliant economic advisors have driven the US economy into a fiscal trap containing a monetary time bomb. And the markets are taking notice.
It’s a pretty state of affairs when China feels impelled to lecture the US on the need for exercising greater fiscal and monetary responsibility. Nevertheless Bernanke and the Obama administration appear to be completely oblivious to the situation. So much so that the Fed was authorised to print $1.75 trillion in new money so as to buy Treasury bonds. It’s almost as if they were deliberately thumbing their noses at the rest of world.
If the economy resumes its downward decline or the average American does not see his financial situation improving soon, expect the Obama administration’s honeymoon to come to an abrupt end. In the final analysis, it is always about jobs and incomes.
American Dream Turning Into A Nightmare
Hard questions are being asked as we confront major issues that will challenge our concepts of traditional American culture and society. The ongoing financial crisis is exposing the myth that America has no fiscal limitations and is able to provide the benefits, wealth and security that many believe they are “entitled to”, simply because they are Americans.
The reality for many is that the “American Dream” never arrived and for many others it is about to disappear. California is the example to the rest of the Nation that every promise made cannot be kept. Governments cannot create wealth by dividing wealth nor can they create wealth through unlimited borrowing and spending. The standard of living for many will decline as promises made cannot be kept.
Our President Isn’t Quite As Advertised - Karl Rove
As a candidate, Mr. Obama promised to end the Iraq war by withdrawing all troops by March 2009. As president, he set a slower pace of drawdown. He has also said he will leave as many as 50,000 Americans troops there.
These reversals are both praiseworthy and evidence that, when it comes to national security, being briefed on terror threats as president is a lot different than placating MoveOn.org and Code Pink activists as a candidate. The realities of governing trump the realities of campaigning.
We are also seeing Mr. Obama reverse himself on the domestic front, but this time in a manner that will do more harm than good.
Mr. Obama campaigned on “responsible fiscal policies,” arguing in a speech on the Senate floor in 2006 that the “rising debt is a hidden domestic enemy.” In his acceptance speech at the Democratic National Convention, he pledged to “go through the federal budget line by line, eliminating programs that no longer work.” Even now, he says he’ll “cut the deficit . . . by half by the end of his first term in office” and is “rooting out waste and abuse” in the budget.
However, Mr. Obama’s fiscally conservative words are betrayed by his liberal actions. He offers an orgy of spending and a bacchanal of debt. His budget plans a 25% increase in the federal government’s share of the GDP, a doubling of the national debt in five years, and a near tripling of it in 10 years.
On health care, Mr. Obama’s election ads decried “government-run health care” as “extreme,” saying it would lead to “higher costs.” Now he is promoting a plan that would result in a de facto government-run health-care system. Even the Washington Post questions it, saying, “It is difficult to imagine . . . benefits from a government-run system.”
Mr. Obama either had very little grasp of what governing would involve or, if he did, he used words meant to mislead the public. Neither option is particularly encouraging.
Terminating Illusions In California - Wesley Pruden
California is the beta state, where everything new is tried and then exported, true or not. Rap, rock, lavender love, student riots, Arianna Huffington, hot rods and the Hula Hoop. Ronald Reagan and the tax revolt. The illusion that you can have it all, and somebody else will pay for it. This week California’s voters offered a view of what happens when big government finally grinds to a noisy halt. Barack Obama could take note.
Geithner Pledges To Cut Deficit
May 21 (Bloomberg) — Treasury Secretary Timothy Geithner said the Obama administration is committed to reducing the federal budget deficit after concerns rose that the U.S. debt rating may eventually be threatened with a downgrade.
The dollar, Treasuries and American stocks slumped today on concern about the U.S. government’s debt rating. Bill Gross, the co-chief investment officer of Pacific Investment Management Co., said the U.S. “eventually” will lose its AAA grade.
Thought Provoking Links
Obama Says US Long-Term Debt Load “Unsustainable”
May 14 (Bloomberg) — President Barack Obama, calling current deficit spending “unsustainable,” warned of skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries.
“We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.”
Is this honest straight talk out of Washington or just paying lip service to concerns about the long term finances of the US? Perhaps we have a President who understands that the United States cannot continue to borrow unlimited trillions of dollars without consequence.
It is difficult, however, to reconcile the President’s concerns with unsustainable debt to his proposed budget with a $2 trillion deficit. What’s the old saying - watch what they do, not what they say?
America’s Triple A Credit Rating - At The Precipice?
Our Nation has avoided the decline into the abyss that many have been predicting during the economic crisis. At the cost of approximately $13 trillion in government bailouts and guarantees the system has been held together but at a very high cost that future generations will bear through higher taxes or a much lower standard of living.
Has “saving” our economy destroyed our economic future?
As Cheney Seizes Spotlight, Many Republicans Wince
Today Cheney is the most visible — and controversial — critic of President Obama’s national security policies and, to the alarm of many people in the Republican Party, the most forceful and uncompromising defender of the Bush administration’s record.
“This isn’t about partisan politics, it’s about what’s right for the country,” said Liz Cheney, the former vice president’s daughter and a former State Department official. “Every American, whether you’re a Republican, Democrat or independent, would agree that before critical decisions are made about national security of the nation, we ought to have a full and fair debate.”
Liz Cheney strongly disagreed with the claim that her father’s vocal defense of Bush administration policies has caused significant unrest within the GOP.
Rarely has an official from one administration moved so quickly and aggressively to criticize a new president.
Cheney may not be the best spokesman here, but at the present time, he seems to be the only one willing to initiate debate on major policy issues.
George F. Will - The Obama administration is bold. It also is careless regarding constitutional values and is acquiring a tincture of lawlessness.
In February, California’s Democratic-controlled Legislature, faced with a $42 billion budget deficit, trimmed $74 million (1.4 percent) from one of the state’s fastest-growing programs, which provides care for low-income…
But the Service Employees International Union collects nearly $5 million a month from 223,000 caregivers who are members. And the Obama administration has told California that unless the $74 million in cuts are rescinded, it will deny the state $6.8 billion in stimulus money.
The Obama administration’s agenda of maximizing dependency involves political favoritism cloaked in the raiment of “economic planning” and “social justice” that somehow produce results superior to what markets produce when freedom allows merit to manifest itself, and incompetence to fail. The administration’s central activity — the political allocation of wealth and opportunity — is not merely susceptible to corruption, it is corruption.
Apparently the rules don’t count, if the end result is deemed sacred.
Obama’s Big Fat Fibbing Budget
Is the White House lying to the American public about the economy? Or, if not outright lying, is it being awfully stingy with the truth?
They see April’s lousy retail numbers and record foreclosure rate. They see unemployment at 8.9%, state tax revenues facing double-digit declines, and a 14% fall in home prices last quarter.
So how can National Economic Council boss Larry Summers, Council of Economic Advisers chief Christina Romer or Treasury Secretary Tim Geithner still believe in a 7.9% unemployment rate and 3.2% GDP growth for 2010…
It isn’t that President Obama wants to mislead the public on the economy. He probably thinks he has no other choice. He has a hugely ambitious agenda that requires huge amounts of money and a hugely aggressive budget.
And by the summer, when the Office of Management and Budget revisits its budget assumptions, the Obama economic mess will be apparent to all.
Sure, it was a mess he inherited. But with his big, fat, fibbing budget, Obama is making that mess his very own.
If the economy does not start to recover, the budget fibs will be the least of our problems.
Across the private sector, workers are swallowing hard as their employers freeze salaries, cancel bonuses, and institute longer work days.
Call it a tale of two economies. Private-sector workers — unionized and nonunion alike — can largely see that without compromises they may be forced to join unemployment lines. Not so in the public sector.
The results of such efforts are evident in the rich rewards that public-sector employees now enjoy. A study in 2005 by the nonpartisan Employee Benefit Research Institute estimated that the average public-sector worker earned 46% more in salary and benefits than comparable private-sector workers.
But the real power of the public sector is showing through in this economic crisis. Some five million private-sector workers have lost their jobs in the last year alone, and their unemployment rate is above 9% according to the BLS. By contrast, public-sector employment has grown in virtually every month of the recession, and the jobless rate for government workers is a mere 2.8%. For anyone who thinks such low unemployment numbers are good news, remember that the bulging public sector must be paid for with revenues that most governments don’t currently have. This is one reason for a spate of state and local tax increases, such as $5 billion in tax increases New York state passed in April, and $12 billion in tax increases California’s legislature agreed to …
In the private sector such efforts will still be subject to the demands of the marketplace. Employers who are too generous with pay and benefits will be punished. In the public sector, however, more union members means more voters. And more voters means more dollars for political campaigns to elect sympathetic politicians who will enact higher taxes to foot the bill for the upward arc of government spending on workers. That will be the pattern for the indefinite future unless taxpayers find a way to roll back the enormous power public workers have acquired.
The disparity between public vs. private employees in compensation, benefits and job security has reached outrageous levels - life should be so good for all of us. Few are benefiting hugely at the expense of many.
There is a reason why private enterprise cannot match the compensation levels of public employees - they would be bankrupt. This issue is starting to get a lot of attention since the unsustainable cost of public sector employees is starting to bankrupt many state and local governments.
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