Squaring the Culture




"...and I will make justice the plumb line, and righteousness the level;
then hail will sweep away the refuge of lies,
and the waters will overflow the secret place."
Isaiah 28:17

06/30/2011 (10:43 am)

In the Wake of an Incoherent Press Conference…

The content of President Obama’s (I still cringe when I type that) opening statement in his press conference yesterday said two things in his usual, indirect and disingenuous manner:

  1. The bad economy is Congressional Republicans’ fault, not mine;
  2. We have to raise taxes on those awful, awful rich people, and those awful, awful oil companies, or the deficits will go on forever.

About the first, Obama’s infantile blame-shifting has long since ceased to surprise. The man has no idea how to improve things, all he knows how to do is blame other people. This is what we get when we elect to the highest executive office of the land an emotional infant who has never done anything other than stir up discontent in others. If he’s the best Democrats have to offer, the party should cease to exist. Obama is an embarrassment.

And no, I don’t mean like GWB was an embarrassment; he was an adult, and knew how to lead. The “incompetence” meme was just partisan noise from people who preferred different policy. I mean a real embarrassment; as in “shamefully exposing what passes for adulthood in the United States these days.”

About the second — raising taxes — I will say simply this:

Revenues to the federal government in 2010 were roughly $2.2 trillion. Stop there, and absorb it. That’s 2,200 billions of dollars. That’s more than 2 million millions. That’s more money than many world economies will ever produce, no matter how many years one measures. That’s how much money the US federal government can spend in one year without having to borrow.

If $2.2 trillion is not enough money with which to govern a nation the size of the United States, then we deserve to collapse.

The answer to anyone who whines that we need more revenue in order to balance the budget must be “Are you kidding?” The answer to anybody who cannot accept that as the final answer should be to be ushered out of government immediately and never allowed to return. If $2 trillion is not enough to run a government for a year, no sum will be enough.

No more revenue increases. Not now. Not ever. Enough.

Obama’s incessant theme of “let’s heap our hatred on the wealthy and ‘powerful’” deserves a separate post, and will get it eventually. Suffice to say here, it’s a deliberate misdirection, and it’s evil. The wealthy and the oil companies did not produce our fiscal nightmare, and fomenting vicious and irrational hatred toward them will not get us out of it.

10/24/2010 (6:16 pm)

Visual Explanation of the Reason For Tea Parties

Deroy Murdock published his personal contribution to mid-term electioneering at National Review Online, and it’s worth a look. Basically, he provided three visual aids. The first two I’ve posted here, below. The first, from the Bureau of Economic Analysis, explains how much federal workers earn compared to private and state workers, and the second, from the Heritage Foundation, compares how much the public and private sectors have grown or shrunk since the beginning of the recession. It’s a good time to be a bureaucrat, but the gravy train is destroying the economy. No economy can afford to swell the bureaucracy so, because bureaucracy does not produce anything; it’s dead weight. Growth in the size and wealth of government and government paychecks always comes at the expense of private wealth. Look:

You’ll have to read Murdock’s column to get the description and the link to the third graphic. It’s a full-size representation of the relationships between government entities in the new Health Care “Reform” Act. A graphic like this one helped to kill the last attempt at nationalizing health care, the Clintons’ miscue in 1993, so somebody’s always attempting to draft the new health-bill-killing graphic. It truly is frightening, but the real perfidy of the health care “reform” is not just its size and complexity; it’s a combination of coercion, arrogance, and cost, at a time when saving the robustness of the economy requires austerity beyond the imagination of the most ardent cost-cutting conservative Representative. The people who jammed this atrocity through Congress should be impeached and required to spend 5 days in the stocks in each of a dozen major US cities.

04/29/2010 (12:27 pm)

White House Warns of Deficit Dangers

Reuters reporst that Peter Orszag, President Obama’s chief budget advisor, is warning that the huge deficits are a bad thing:

Orszag warned that huge deficits could cause the market to lose confidence in a government’s creditworthiness.

Out-of-control deficits could also “require increased borrowing abroad which will mortgage our future income to foreign creditors,” Orszag told the first meeting of the 18-member National Commission on Fiscal Responsibility and Reform.

Ya think?

Just a little reality check here:

The deficits were already far too large before Obama took office; the Bush administration had rung up annual deficits in the $450 billion range, which is completely unacceptable. Everything bad about continual, oversized budget deficits was going to happen eventually if that pattern had continued.

However, the Obama administration increased that annual budget deficit number by a factor greater than 3 within the first month or so of taking office. It went from $450 billion to around $1.6 trillion, that quickly. The gap between government spending and government income increased by more than $1 trillion.

How did that happen?

Democrats love to point to wars, defense spending, and tax cuts from the Bush administration… but the real story is this extra $1 trillion hole. The Bush wars and the Bush tax cuts were already reflected in the $450 billion deficit that existed before Obama took office. That extra $1 trillion deficit came from somewhere else. And the somewhere else it came from can all be found in the table of contents of the Stimulus Bill: vastly expanded social spending, and tax credits directed toward the Democrats’ pet projects.

Yep, deficits are dangerous, and Democrats develop deficits. Drawn your own conclusions.

03/26/2010 (4:34 am)

Social Security Income Goes Negative

The New York Times reported yesterday, accompanied by a wearyingly familiar drizzle of misinformation, that the Social Security system will be paying out more in benefits that it is receiving in revenues this year, for the first time.

Trustees of Social Security adjusted their figures 10 months ago and announced that the program’s outlays would exceed its income in 2016, which was a year sooner than previously expected. They cited the economic downturn reducing revenue and inducing workers to claim benefits earlier than expected. Apparently they underestimated these effects. The tipping point has been reached 6 years ahead of schedule.

This is the beginning of the last chapter in a long, slow economic death for the US economy that’s been in motion since the 1930s. While the Times and the Social Security trustees point out that the program holds $2.5 trillion in trust for future recipients, the fact is that this trust fund is simply debt that the government owes itself. The difference between what SS takes in and what it pays out will have to be paid from the government’s general revenues — our tax dollars. Social Security has always been a Ponzi game, and this day, though accelerated by the Baby Boom and by the erasure of 50 million potential taxpayers through abortions, was inevitable from the beginning.

Think of it this way: imagine that you started saving for your kids’ college education when you were 25, setting $200 a month aside in your budget to place in savings. Then imagine that you said to yourself, “I could really use that money.” So, you wrote yourself an IOU, saying “I promise to repay my kids’ savings $200 plus interest.” Then, you took the $200 back from your kids’ savings and spent it on groceries, fixing the car, vacations, or whatever. The next month you did the same thing, and you continued to do the same thing, month after month, for the next 18 years. At the end of that 18 years, you would have had a ledger showing that you owe your kids’ savings $43,200 plus interest. How much will that ledger help you in paying for your kids’ college at that point? Answer: obviously, not at all. You’ll have to pay the entire college education out of your current income moving forward. You only saved the money on paper; you actually spent it.

That’s exactly what the government has been doing with Social Security (and Medicare, Medicaid, the Veteran’s Administration, the GI bill, and so forth.) Revenue from those programs goes into a trust fund… which turns around and loans the money back to the government, to be spent on that year’s budget items. The trust fund is all on paper, a $2.5 trillion IOU to ourselves. The money will come from tax receipts, or the government will borrow it, or the government will print it. Those are the choices.

The misinformation in the Times article touches three topics:

1) Who’s at fault. The reporter apparently interviewed Alan Greenspan, former Chairman of the Federal Reserve, because he chaired a commission addressing a shortfall in Social Security funding in 1982. The article omits any mention of Congress, which is actually responsible for budgeting. Also notably missing are financial advisors within the Obama administration, who are responsible along with Congress for the incredible deficit production — Peter Orszag at OMB, Larry Summers among the economic advisors, Tim Geithner at Treasury. The focus on Greenspan makes it seem like he, and not the players actually responsible for the deficits, is at fault, which is absolutely misleading.

This paragraph, discussing Greenspan’s 1982 commission, takes the cake:

The easiest choice, politically, would have been “solving the problem with the stroke of a pen, by printing the money,” Mr. Greenspan said. But one member of the commission, Claude Pepper, then a House representative, blocked that approach because he feared it would undermine Social Security, changing it from a respected, self-sustaining old-age program into welfare.

The author makes it sound like Greenspan actually recommended printing money, but was stopped by Claude Pepper. There was no such recommendation, and if there had been, it would not have produced the change mentioned. Since this is all that is said about the 1982 commission, which apart from this article is generally credited with saving Social Security by serious, responsible action, the article is simply defamatory.

2) What’s causing the deficits. Here’s what the article says:

The United States’ soaring debt — propelled by tax cuts, wars and large expenditures to help banks and the housing market — has become a hot issue as Democrats gauge their vulnerability in the coming elections.

The structural portion of the deficit is the result mostly of growing debt service costs and growing entitlements. During the Bush years, revenues dropped due to economic downturns, and spending rose in Medicare, education, and war. However, deficits, which were already far too high in 2008, jumped by 350% in 2009. That’s soaring. The tax cuts did not change in 2009. The wars did not cost substantially more in 2009 than in 2008. So, no, the soaring debt is neither propelled by tax cuts nor by wars. It’s been caused by the bailouts, but also by acceleration of social spending — vastly expanded Pell grants, swelling “anti-poverty” programs, billions in energy subsidies for pipe dreams, all encompassed in an enormous “stimulus” bill that appears to have as its target enriching Democratic party donors while breaking the bank.

3) Where Social Security stands. The article treats the trust fund as though it genuinely exists, and puts the time for cutting benefits at the point where the trust fund reaches zero, which is projected to be around 2037. In actual fact, the government will lack the ability to pay Social Security benefits long before that. As explained above, the trust fund simply gives SS dibs on $2.5 trillion of tax money as it comes in. Other spending items, like the daily operation of the gazillion government offices and programs, are competing for the same tax dollars. Somebody is not going to get funded. The competition for tax dollars starts… now.

I’ll end this with a reminder that I said about a year ago that I’d keep. It’s a video from President Bush’s 2006 State of the Union address, during which Democrats in Congress stood up and applauded their own obstruction of a serious attempt to address the structural deficiency in Social Security. Bush recognized the real problem, and Democrats uniformly demagogued the issue, killing any hope of a real solution. Watch them congratulate themselves on guaranteeing the financial collapse of the greatest poverty-erasing machine in history.

03/06/2010 (11:19 am)

Ryan Pulls Back the Covers

If you have not already seen this video of Rep. Paul Ryan (R, WI) explaining to Obama’s Health Care Summit how the Democrats have jimmied the numbers for their health care bill, watch it now. In just over five minutes, he exposes the smoke and mirrors in the Senate health care bill, the double counting, the covert moving of funds from Medicare and Social Security, the separate bills to hide spending. He reveals how dishonest an exercise health care “reform” has been from a fiscal standpoint. Key line: “Hiding spending does not reduce spending.”

Keep in mind that Ryan is just rehearsing the annual numbers. This does not include long-term liabilities, which is where the federal government really breaks the bank. Government uses cash accounting, like Girl Scouts who sell cookies might do with their cash pouch. If they used accrual-based accounting, like virtually every corporation in America does, the national debt would be closer to $65 trillion than to $12 trillion — and health care “reform” will add to that dramatically.

This comes into greater focus as we examine the CBO’s estimate that the Obama administration’s budget will generate a trillion dollars in deficits more than he has predicted, over the next 10 years. And of course, he has shoved the entire question of reforming Medicare and Social Security off to a “commission” that will not even report until after his first term has ended.

If anybody believes the Democrats are serious about addressing the nation’s debt, they need a ringing smack to the head. They really do believe that money grows on trees, and that it’s “immoral” to consider what we can actually afford when planning government programs. Just concerning health care alone, if you believe that the government can absorb 1/7 of the US economy and insure 40 million new enrollees without adding a single doctor or specifying a single, new source of revenue, and not vastly expand the deficit, you believe in faeries and leprechauns. And if you believe that the Obama administration’s projections of health care costs will not be shown to be grossly understated within the first year, just like every state-paid health insurance plan has and just like every federal entitlement program in history has, you should go get yourself a thorazine drip.

03/05/2010 (5:01 pm)

The Cutting and the Crying: Suck It Up

I picked up on two reports today from around the country that highlight citizen complaints in response to government cutbacks, another sign of what we should expect through the coming decade.

In the first, students at universities around the country are protesting the cutting of state funding for education, and apparently doing so in a disruptive fashion, blocking freeways and freeway on-ramps, slugging police officers, pulling fire alarms for no reason, and so forth.

The article reporting this, written by a half-dozen AP reporters, is a prime instance of leftist media bias, in that it carefully masks the political orientation of the protesters. It also avoids producing a hard count of the protesters, although one particular protest at UC Davis apparently produced about 300 people. The writers attempt to make this into a revolt by Everyman:

Students, teachers, parents and school employees rallied and marched Thursday at college campuses, public parks and government buildings in many U.S. cities in what was called the March 4 Day of Action to Defend Public Education.

Of course, this was a nationally-coordinated effort by hard leftists. Check the list of sponsors for the March 4th Strike and Day of Action in defense of public education in California; it reads like an exhaustive list of unions, union organizers, and hard-left action committees. We’re looking here at the classic strategy of neo-Marxists, using growing political instability as a springboard for fomenting revolution.

Imagine how the Tea Parties would have been reported if any of them had produced even a fraction of the deliberate, disruptive action this small protest produced.

The second instance is closer to grass roots. Citizens in Arizona are starting to complain about the state closing down highway rest stops as a cost-cutting measure. It apparently costs the state about $300,000 a year to keep a single rest stop clean and functional. The state closed 13 out of 18 rest stops; this is clearly only one of dozens of measures they’ll be taking to save money, as the Arizona Dept of Transportation is about $100 million in the red.

Frankly, I can appreciate the importance of a stop in the desert as well as the next man, but this highlights the sort of re-adjustment we’re all going to face in the coming years. The simple fact is that we have all gotten used to government activism in any number of public functions, a level of activism that government simply cannot sustain over the long haul. Even in a good economy, government cannot guarantee that your life will be easy, and will go bankrupt if it tries.

In 1997, my wife was incapacitated for about 6 months, and I had to take on the role of Mr. Mom. I had four kids aged from 6 to 16, and we had one television. I attempted to arbitrate the use of it so that each got to watch at least one show they really liked, but so they did not watch too much. That attempt failed, and they were all spending too much time in front of the tube; so one day, in a moment of lucid frustration, I unplugged the damned thing from right in front of the four of them, and carried it out to the curb.

The outcome was remarkable. The kids complained bitterly from the lack of TV for about a month. Then, suddenly, they all discovered reading and board games, and the complaints stopped. Suddenly, they were all using their brains during their leisure time. It was one of the best moves I ever made.

I bring it up because it illustrates what is going to happen as government recedes from our lives by necessity, as we start forcing government to live within its means. We’re not going to like losing what we have to lose. We’re going to feel the pain. We’re going to complain. And then, once we’ve gotten it out of our system, truckers will start carrying their own port-a-potties in the backs of their trucks, and we’ll learn to do without rest stops. Parents will start saving for college educations again instead of counting on the state to provide it for free. We’ll all begin doing for ourselves again.

So, expect to see two types of citizen unrest in the coming years: organized, opportunistic attempts to produce revolution, and sincere, well-intentioned griping about losing important services. Regarding the third type, citizens rebelling against an intrusive and overbearing government, let’s hope we don’t have to produce anything more disruptive than those actions we have already produced.

03/03/2010 (9:52 am)

The Bunning Barometer

100225_bunning_ap_218Sen. Jim Bunning has just done the American people a huge favor, and we need to take careful note. He’s demonstrated for us all which Senators can be trusted to restore fiscal sanity to Congress, and which cannot. The number who can is small. I list them at the end of this post.

If you want the full description of the week-long flap Bunning created in the Senate, Michelle Malkin and the Heritage Foundation provide a reasonable level of detail. I will summarize the affair here.

A month ago, Democrats passed a bill in the Senate called “Paygo,” or Pay-As-You-Go, on a party line vote. Paygo basically requires the Senate to specify, in every bill that requires spending, where the money is going to come from. Its goal, on the surface, is to block bills that add to the deficit. Democrats passed the bill because they want to look like they’re concerned about the deficits (which they’ve quadrupled since they took over Congress.) Republicans opposed the bill because they suspected it was a cover to raise taxes dramatically.

I say “they want to look like they’re concerned” because the Senate has tried Paygo before, and it accomplished nothing. Paygo was in force from 1991 through 2002, During that period, the Senate approved $700 billion in entitlement expansions and tax cuts that were not paid for, in violation of the Paygo principle. They did it by adding to each bill a clause stating that the bill was an “emergency” bill, the exception permitted in Paygo. And yes, Democrats, the Republicans controlled the Senate for a good portion of that period. There are guilty parties on both sides.

Last week, true to form, the Senate proposed a $15 billion extension of unemployment and other benefits for which only $5 billion was paid for in the bill. They excused the other $10 billion by declaring the bill an “emergency” bill. And this is where Sen. Bunning jumped in.

Sen. Harry Reid, Majority Leader, attempted to pass the extension bill, which was actually a House bill (H.R. 4691,) by unanimous consent. Bunning simply stood up and said “I object.” This prevents the bill from passing by unanimous consent, and requires debate, cloture, and a roll call vote instead. What Bunning insisted on, in his objection, was that the Senate add specific measures to the bill that would explain where the $10 billion was going to come from; he suggested that they designate $10 billion from the TARP funds that have not been spent yet.

The Democrats proved what complete, vicious liars they are by demagoguing the matter for the better part of a week. They could simply have held discussion and the roll call vote, which would have prevented the delay. The delay was completely unnecessary, and occurred solely because the Democrats did not want their names associated with the passage of this bill that violates Paygo.

Rather than go on record, the Democrats went berserk. They blamed Bunning for the delay they were causing, by inaccurately calling the move a filibuster. They publicly flogged Bunning for voting against Paygo a month ago. They tried their best to make him look like a monster stealing bread out of the mouths of starving children. They screeched about Iraq war spending, as though that justifies irresponsible behavior here. They publicized it when he cursed from the back row. They kicked and screamed and lied like the infantile tantrum-throwers that they are.

And more than half the Republicans in the Senate blanched and ran away, too cowardly to stand by principle.

The nation is fiscally doomed. The dollar is about to collapse. Congress has created a fiscal nightmare over the past 70 years, and the concern being shown today is too small and too late by many orders of magnitude. But if the nation is ever going to return to sanity, and if the nation is even going to survive the coming collapse, we need representatives in the government who have the courage to enforce fiscal discipline. Specifically, what they will need the courage to do is what Bunning is doing here: 1) demanding that everything be paid for, and 2) withstanding vicious Democrats calling them names, because that’s what they’re going to do every time.

The Senate held the roll call vote last night, after dismissing on a procedural technicality an amendment to pay for the bill. We now know which Senators have the backbone at least to begin to actually solve the fiscal nightmare. Whether they have the stones to actually cut spending programs is another, more serious question, but one for another day.

Here are the names of the Senators who either voted against the bill in its fiscally irresponsible form, or did not vote:

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Those who voted in favor of the bill lack the stomach to force the Senate to behave in a fiscally responsible manner. If your Senator’s name is not on this list, I recommend that you work to dump their cowardly ass on the pavement the next time they come up for re-election. It’s the ones on the “Nay” list who have been shown by the Bunning Barometer to have at least a little of the stuff that restoring fiscal sanity will require.

Note that there is not a single Democrat among the “Nays” — and frankly, we already know all we need to know about Sens. Byrd and Lautenberg, who did not vote. All the Democratic Senators deserve to be thrown into the sea with millstones around their necks. And they can take the 25 chicken-shit Republican Senators with them.

Thank you for the barometer, Senator Bunning. I’m sorry you’ve decided to retire. We need more like you.

02/17/2010 (7:18 pm)

What Really Lies Behind the $1.6 Trillion Deficit

After a lifetime of being warned, suddenly now politicians are becoming aware of the looming fiscal disaster that threatens the immediate future of the American republic… and they’re blaming the other guy.

ABC News produced a report on the $1.6 trillion deficit that is jaw-dropping in its obtuseness. They purport to be “trying to wrap their heads around this” and “wondering, how did we get here, especially when it wasn’t long ago that we had a surplus.” Guess who they blame it on?

(Note: ABC revoked bloggers’ ability to display their videos, but they did upload this one to YouTube, so here’s a link to the YouTube version.)

Un. Freaking. Believable.

First of all, did you notice how they tacked a commercial for national health care onto the end of that — without even a word regarding how much worse it will make the deficit picture? I’ll repeat this as many times as it needs to be repeated until everybody gets it: to be advocating subsuming 1/7 of the US economy without raising taxes while facing a $1.6 trillion annual deficit is criminal. The President and his buddies in Congress should be Thrown. In. Jail. for even suggesting it.

Secondly, did you notice how they blamed the entire picture on George W. Bush? President Obama was blamed in passing because he “adopted a lot of those same policies” as the Bush administration. President Obama gladly concurs (with my emphasis):

“It keeps me awake at night, looking at all that red ink,” said President Obama in Nashua, N.H., on Feb. 2. “Most of it is structural and we inherited it. The only way that we are going to fix it is if both parties come together and start making some tough decisions about our long-term priorities.”

Yeah, the structural part came from past Democrats and he inherited it (we’ll talk about this next, oh yes, we will); but the deficit went from what was then a record high of $438 billion during George Bush’s last year in office, to a current $1,600 billion, in just a single year. Not a penny of that 4X increase can be blamed on George Bush; it’s Obama’s deficit, and the lying sack of #*@!&$ knows it.

Oh, and just a reminder from 7th grade Civics class: Congress actually holds the purse strings. The record deficit years during the Bush administration occurred after Democrats took over Congress. Recall that the size of the deficit quadrupled during the first month of Obama’s term. They did it with “stimulus” legislation that was really aimed at rewarding Democratic donors, a bill written behind closed doors with Republicans locked out, passed in crisis mode in the dead of night without allowing anybody to read the bill. They did it with unprecedented government takeovers of insurance, banking, and automobile industries. Remember all that? Yeah, the current administration inherited the mess. Yeah, yeah.

bookofgloom2In no way do I excuse George Bush and the Republicans in Congress from what I’m going to describe next, though. The criminal fraud in government accounting has been perpetrated by the entire government, and virtually no hands are clean. The Republicans are particularly culpable for spreading the loco-weed dream that we had a surplus at the turn of the millennium, and then spending it, when anybody with the slightest accounting sense knew perfectly well that the surplus was fiction. But let’s not let Pelosi, Reid, and Obama off the hook; they’ve taken a disastrous situation and immediately made it much, much worse, with the Day of Reckoning moved forward by a decade or so, and the size of the Armageddon amplified by a factor of 2.

Here’s where we get into the real mess. This ABC video did not mention once the real causes of the enormous deficit that promises to continue into the future: favored Democratic programs that have grown out of control. By far the largest drains on the national budget, and the items threatening massive deficits into the foreseeable future, are Social Security, Medicare, Medicaid, and federal pensions. These were created by federal legislation decades ago, so they never appear in the annual budget bills in Congress; this is the “structural spending” that President Obama is pleased to say that he inherited. Just from the demographics of retiring Baby Boomers, paying for the Medicare, Medicaid, and Social Security programs using tax revenue will require additional taxes amounting to $12,000 per year per household in the next couple of decades — either that, or we need to eliminate all other government spending (including military.)

I’m going to let economic analyst John Williams describe how we really got into the deficit mess we’re in, from his 2004 newsletter entitled Federal Deficit Reality. Take it away, John.

Misleading accounting used by the U.S. government, both in financial and economic reporting, far exceeds the scope of corporate accounting wrongdoing that has received partial credit for recent stock market turbulence. The bad boys of Corporate America, though, still were subject to significant regulatory oversights and the application of GAAP accounting to their books. In contrast, the government’s operations and economic reporting have been subject to oversight solely by Congress, America’s only “distinctly native criminal class.”[1]

Nearly four decades ago, President Lyndon Johnson’s political sensitivities led him and the Congress to slough off some of the costs of an escalating Vietnam War through the use of accounting gimmicks. To mask the rapid growth in the federal government’s budget deficit, revenues from the surplus being generated by Social Security taxes were added into the general cash fund, without making any accounting allowance for the accompanying and increasing Social Security liabilities. This accounting-gimmicked reporting was dubbed “unified” budget accounting.

The government’s accounting then, as it is now, was on a cash basis, reflecting cash revenues versus cash expenditures. There were no accruals made for monies owed by or due to the government at some time in the future.

The bogus accounting understated the actual deficit for decades and even allowed for claims of budget surpluses in the years 1998 to 2001. While there were extensive self-congratulatory comments between the President, Congress and the Fed Chairman, at the time, all involved knew there never were any actual budget surpluses. There hasn’t been an actual balanced budget, let alone a surplus, since before Johnson and his cronies cooked the bookkeeping…

Williams goes on to discuss the US Government’s books being reported using accrual-based accounting and Generally Accepted Accounting Principles (GAAP,) just as every corporation in America is required to do. If you’re using accrual-based accounting, GAAP requires that future obligations be accounted as long-term liabilities, and that hard assets be accounted as assets and depreciated as they age. Rolling Social Security, Medicare, and Medicaid into the accounting completes the picture.

In 2008, using cash-based accounting as the government usually does, the US government faced a deficit of around $450 billion. Using accrual-based accounting according to GAAP, which reflects future obligations, the deficit was actually closer to $5.1 trillion. That number reflects the receipts from Social Security and Medicare that we actually owe to future generations. And whereas the national debt stood at around $9 trillion at the end of 2008 in terms of actual treasury bills, when we include the accrued obligations of SSI, Medicare, Medicaid, federal pensions, and other structural entitlements, the national debt actually totals roughly $65 trillion.

Sixty five trillion dollars in debt. That is larger than the entire world’s Gross Domestic Product combined.

GovtObligationsVsGDP200812

Recall the reassuring words from the video, “We had a surplus.” Anybody with a computer can check for themselves; the national debt increased during the years with the alleged surplus. Even without GAAP, the surplus was an accounting fiction.

But the reality is much worse than that. Fiscal hawks have been warning, not just during those years, but for at least 3 decades before them, that the trajectory of federal spending was leading us to a fatal precipice, that we would have to make massive changes in structural spending to avoid; the relatively small deficit of the late 1990s was just a short respite from a long-standing and entirely predictable slide into insolvency. The position of this video and its clueless authors, that everything was fine but then along came Bush, is pernicious, mindless pap written by ignoramuses who don’t know enough fiscal history to wipe their shoes with. The economy started toward this cliff ‘way back during the FDR administration, sped up the career during the Great Society, and we’ve been trying to get the attention of the Democratic shopaholics ever since.

I wish there was a way to make criminal the degree of ignorance displayed in ABC’s video without endangering liberty generally. Sawyer and Muir deserve a week in the stocks being pelted with rotten vegetables for their level of stupidity. My God.

BeyondtheMeansAll members of Congress from the 1960s forward, along with all members of the government financial apparatus from the same period, are equally guilty for the five-decade cover-up of the government’s financial irresponsibility, the result of which we will see shortly. That’s the cover-up, and I won’t say what I think those people deserve. The current and future budget deficits themselves represent the complete and utter collapse of Democratic social policy. There is no other significant cause of the crisis. Ours is the economy the Democrats broke. Very simply put, no economy can afford the Utopian dreams of modern progressives. They are simply beyond the means of humanity. Even the relatively modest support currently offered by the US government has produced a debt larger than the ability of the entire world to pay.

The entire world will pay, though. With debt that large spread throughout the world in the form of US Treasury notes and US dollars, when the collapse comes, the world’s economy will collapse with it.

The collapse will come as hyperinflation. It’s very simple: the T-bill is the last bubble. The world’s investors will shortly figure out, based on the massive deficits, that the T-bill is a terrible investment, and they’ll start dumping them. This has already begun. Once foreigners stop buying our debt, the Fed will have to buy it in order to finance the deficits — and they’ll buy it using dollars that don’t exist yet. This will expand the money supply dramatically, which will dilute the value of the dollar dramatically. Your savings will be worthless, and so will your pension. It might stop if the government could dramatically cut Social Security, Medicare, Medicaid, and federal pension payments — and I do mean dramatically. But the political will does not exist to do that, and the voters would thrash any politician who tried.

I’m not a financial consultant, so my comments cannot be taken as financial advice. However, I’m getting to know Jesus a lot better these days, because when the collapse comes, only those who know how to rely on His provision will have enough to get by. Beyond that, I think I’ll buy gold and firearms, and learn to garden. The good days are about to end.

Financial Times tells us that there’s at least one Fed board member who sees the collapse coming and is warning people about it. Too little, too late, but…

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02/02/2010 (10:46 am)

A New Political Term: Debt Reduction

federal-spending_10-850

I’m officially creating a new political term today: Debt Reduction.

Yeah, I know it’s not original. But we need to start saying it, and meaning it.

The President is calling for a Spending Freeze, in a manner that nearly everybody recognizes as a meaningless facade. Rasmussen’s latest poll indicates that fewer than 10% of Americans believe that the spending freeze called for in the President’s State of the Union address will actually reduce the deficit a significant amount. I don’t think I’ve ever seen a poll showing greater disbelief from the American people on any topic.

But the act of actually calling for the freeze indicates that the President’s focus group watchers know that the people want somehow to reduce these deficits dramatically.

Notice that last phrase: “reduce these deficits.” The Obama administration claims to be pursuing the goal of reducing the deficits to only 3% of Gross Domestic Product by 2015. Is that a suitable goal? Not at all: with the US GDP hovering a bit over $14 trillion, what it means is that when the administration reaches its goal, we’ll only be adding another $420 billion in new debt every year. I’ll repeat that: when Obama reaches the place where he considers the US to be acting responsibly, we will be adding another $420 billion to the national debt — every year.

Meanwhile, the current budget, assuming the President is not being overly optimistic about tax revenues (which we all know he is,) calls for a deficit equal to 10.6% of GDP. Again, let me repeat that: the amount that the government will be spending beyond what the government will receive in revenue is greater than 10% of what the entire nation will produce this year.

Who says spending is out of control?

It’s time to revisit the difference between a deficit and a debt. Because we can’t afford to aim at deficit reduction sometime in the future. If the US economy is to survive as a first world economy, we have to aim for debt reduction, and that right soon.

A deficit occurs when you spend more money than you make in a given year. I earn $50,000 a year (hypothetically): I actually spend $52,000 in that year. Where does the extra $2,000 come from? Well, I put it on a credit card. At the end of the year, I owe the credit card company $2,000. The deficit is $2,000, the debt is also $2,000.

Then I do it again: the next year, I earn $50,000, but spend $52,000. I borrow another $2,000 from the same credit card company. The deficit is $2,000, but now (because I have not paid off the debt from last year) the total debt is $4,000. “Deficit” refers to yearly budget figures; “debt” refers to what we owe overall.

Every year I do this again, I maintain a deficit of $2,000, but my debt keeps getting deeper and deeper. And because we all know from experience that debt is not free, the amount of my $50,000 that I have to spend just to keep the credit card company from hounding me with collection calls keeps getting larger.

This is the current state of the US federal government, the reason why the Chinese are starting to bail on Treasury bills, and why interest rates are starting to climb. I wrote about it back in December, noting that we’re quickly approaching the point where the interest to service the national debt will exceed all discretionary, non-military spending. That’s the built-in, annual deficit. Meanwhile, the Senate has just raised the debt ceiling for the US another $2 trillion, to $14.3 trillion. Our total debt is approaching the nation’s total production, and we’re now adding nearly $2 trillion in new debt every year.

If my hypothetical family had been spending so irresponsibly that I was approaching credit card debt equal to my annual income, the solution would be plain and dramatic: I would need to stop spending immediately, and go into a radical program of debt reduction. I would have to set up a budget on which I was living on considerably less than my $50,000 annual income — making lifestyle choices that made that possible, like cutting out all entertainment expenditures, eating beans and rice instead of steak and shrimp, and patching clothes when they wore out — and aggressively pay down the credit card debt until it reached zero.

To speak of shaving the size of the federal deficit at this moment would be like my hypothetical family agreeing to put only $1,750 dollars onto the credit card this year, instead of $2,000 . (To speak of subsuming 1/7 of the US economy for health care at this moment is like that family trying to purchase a five-million-dollar yacht. It’s criminal.) We do not need to reduce the deficit gradually. We need to move dramatically and immediately to reduce the debt.

This means moving immediately to solve Medicaid, Medicare, Social Security, and federal pensions in such a way as to move all four onto actuarially sound financial footing. This means cutting benefits. Sorry, that’s a fact.

I detested President Clinton for his routine flouting of the law and his narcissism; but the greatest crime of the Clinton administration was not undermining citizens’ legitimate lawsuits, nor was it putting US policy up for sale. His greatest crime was squandering an opportunity to solve the approaching fiscal bomb of Social Security, Medicare, and Medicaid. He had a good economy, and he was popular; the political times were ripe for making Social Security partly private (as all European socialist nations have done) and trimming Medicare and Medicaid to conform to the real world. Instead, he chose to play accounting tricks to make the good economic times seem better than they were and secure his legacy in the history books.

But the problem is not just Clinton’s: Medicare and Medicaid date from Johnson’s Great Society, Social Security from the New Deal, and no administration since, Democrat or Republican, has addressed the obvious actuarial imbalance in those programs. It was plain that these programs could not continue as they were, but nobody did anything about them. George W. Bush made a half-hearted wave in the direction of solving Social Security, but surrendered without a fight in the face of a Democratic party public relations onslaught, even though he was a second-term President with nothing to lose. And today, with the Democrats playing Russian Roulette with $2 trillion annual deficits, Republicans are merely squawking about possible tax increases.

I’ve got bad news: if the US is ever going to return to fiscal sanity, some tax increases will have to happen. I’m sorry, but it’s a fact.

But saying so is not enough, not by 1/10. The first, second, third, sixteenth, and three hundredth steps have to be hard, unyielding, persistent cutting of federal spending — and that means persistent reduction in federal power. We must declare full-out war against government spending. Everything has to be cut. Everything. Every program you like has to be reduced. Unnecessary departments have to be eliminated. Mandates have to be dismantled. Projects spanning multiple presidential administrations need to be established to seek out, examine, and ultimate eliminate 9/10 of the nonsense currently performed by the federal government. We have to agree to give up the big items. Including reductions in the military. There, I said it.

Beans and rice instead of steak and shrimp — for the rest of our lives, and then some. We’ve got $12 trillion to pay back. That’s reality. There is no other way.

And fellow Boomers, we’ve had a nice run, but it’s time to pay the piper. Our ancestors paid hard prices to rescue the nation from danger in the past, fought wars and suffered depressions and so forth. It’s our turn. If the Obama administration forced us to accept health care rationing while pretending to serve us, that would be tyranny. But we can choose to cut our own benefits willingly, for the benefit of our children. Maybe we didn’t break it, but we enjoyed it. It’s our job to fix it — and if we do it willingly, it’s not tyranny.

If the Tea Party movement, currently more popular than either Democrats or Republicans, is to produce anything of value, it will have to be this: elect one Representative after another, and one Senator after another, who pledges to cut into government spending enough to reduce the debt, not just the deficit. And then, hold them accountable for doing so, and — this part is crucial — not go berserk and hand the government over to tax-and-spend Democrats every time a Congress acts responsibly and cuts some program we like. Let’s be adults.

It’s either that, or get used to living in Argentina. ‘Cause that’s what the US is going to become if we don’t start reducing the debt.

02/01/2010 (11:14 am)

$5 Trillion More Debt

From the Politico:

President Barack Obama’s new $3.83 trillion budget paints a bleak landscape of record deficits aggravated by the economy and wars overseas and now threatening to pull down his top legislative domestic priority—health care reform

Released to Congress Monday morning, the president’s spending plan anticipates $5.08 trillion in deficits over the next five years and seems almost a cry for help in the face of what he sees as intransigent Republican opposition.

orszagRecite with me the lesson we all learned in 7th grade civics: “Congress holds the purse strings.” The President proposes, but it’s Congress that ultimately spends the money. The Democrats, who took over Congress in January of 2007, have been spending without restraint ever since, without the slightest mention of where the money would come from. They produced record deficits during the last two years of the Bush administration, and then, with a Democratic President who loved spending even more, quadrupled the largest Bush deficit in a single month, and have been burning through cash at an earth-record-shattering rate.

In this setting, for the President and Congress to be proposing absorbing 1/7 of the US economy while pretending that it would be revenue-neutral to do it, constitutes criminal negligence. For the President to be taking over huge business enterprises and infusing them with cash, constitutes criminal negligence. They should be impeached. I’m not kidding.

Ratcheting up spending was Phase One. Now get a load of Phase Two, from today’s New York Times:

[The President] said that his proposal to freeze many domestic programs for three years as a down payment involves “hard choices and painful tradeoffs not seen in Washington for many years.” Yet with the debt accumulated from the deficits of the past decade, he acknowledged, “our fiscal situation remains unacceptable.”

So he will ask a yet-to-be-named bipartisan commission to recommend by December a plan to balance the operating budget by fiscal year 2015, not counting the growing payments on the country’s amassed debt. Congressional leaders have committed to hold a vote on whatever plan such a commission produces.

Having forced spending dramatically upward, they now propose to call themselves “responsible” for freezing domestic spending at the newer, higher level. They will proceed to tell us that taxes have to rise dramatically, and that that is the only responsible approach to restoring fiscal sanity. Welcome to the new, European-style socialist America.

We refuse to learn the lesson: however genteel and caring programs like Medicaid and Social Security sound, even the richest nation in the history of the planet cannot ultimately afford them. Life is hard, and requires of us measures to provide for ourselves. Attempts by the government to shield citizens from the ordinary hardships of life and produce Utopia will always founder on the rocks of reality: there is not enough money in the world to buy complete protection. Ultimately. to balance the budget and save the dollar, taxes will have to be raised — but ultimately, benefits will have to be cut, and government be reduced to manageable size. Obama and the Democrats hope we never think of the latter, but that’s the only avenue that will restore fiscal sanity. Big government was the cause; little government is therefore the cure.

All I can say is, invest in hard currency, and learn to garden. There is no way that the dollar can sustain this sort of irresponsible spending; the collapse is coming very soon. And buy firearms and ammunition, because you’re probably going to have to defend your garden from thieves. Welcome to the inevitable outcome of socialist policies.

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