Tag Archives: Debt

Dealing With Reality

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Wolf Blitzer of CNN recently demonstrated how detached he was from reality during an interview with new Texas Senator, Ted Cruz, a tea-party conservative.  Cruz understands that our unsustainable debt is, in reality, unsustainable.  Cruz insists that we take this threat seriously.

To Blitzer, and the legions of reporters like him, this makes Cruz an extremist.  They are committed to the meme that serious fiscal conservatives are foolish troublemakers.  After Cruz discussed the seriousness of our debt situation, Blitzer lectured Cruz, saying, “You’ve got to deal with reality“.

So a man who is seriously attempting to deal with reality was attacked by a man who, like his colleagues, routinely hides and distorts reality.  Amazing, isn’t it?  It’s Mister Blitzer who needs to educate himself about reality.  He might start with this enlightening article by Chris Cox and Bill Archer.

Cox and Archer explain why our debt is actually far greater than we are led to believe. Excerpts:

We most often hear about the alarming $15.96 trillion national debt (more than
100% of GDP), and the 2012 budget deficit of $1.1 trillion (6.97% of GDP). As
dangerous as those numbers are, they do not begin to tell the story of the
federal government’s true liabilities.

The actual liabilities of the federal government—including Social Security, Medicare, and federal employees’ future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion. Nothing like that figure is used in calculating the deficit. In reality, the reported budget deficit is less than one-fifth of the more accurate figure.

…In short, if the government confiscated the entire adjusted gross income of
these American taxpayers, plus all of the corporate taxable income in the year
before the recession, it wouldn’t be nearly enough to fund the over $8 trillion
per year in the growth of U.S. liabilities. Some public officials and pundits
claim we can dig our way out through tax increases on upper-income earners, or
even all taxpayers. In reality, that would amount to bailing out the Pacific
Ocean with a teaspoon. Only by addressing these unsustainable spending
commitments can the nation’s debt and deficit problems be solved.

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Balance Sheet Woes Coming To Roost…

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Mr. Pinard, a good friend and small business owner in Texas, was talking to me recently about the frustration of having to watch the mud-slinging between the two presidential candidates.  In the melee of gaffs, gotcha commercials, and character attacks, he noted that no one was talking about the worst threat to our future: the debt.  Mr. Pinard has to make sure that his books are balanced 365 days a year.  If he were to fail to bring in more revenue than he spends, he would have to slow the growth of his company and even fire people.  If the problem were to persist, he would go out of business.  The only difference between Mr. Pinard’s home health business and the US is the timeline.  Mr. Pinard doesn’t have a Ben Bernanke there to bankroll poor management and pass judgement day to a future generation.

The delay between action and consequence is the only reason that democrats are still taken seriously today.  Like a spoiled child gambling in Las Vegas, they have little concern or awareness of the bills they are racking up.  Even the president of the United States couldn’t answer how much his country owes to lenders.  When confronted, Obama and other democrats use a reliable excuse they’ve been using for decades ”the debt doesn’t pose a short-term problem”.

That is no longer the case.  On Sunday, Bryce wrote a great article describing how the debt not only poses a threat to our economy, but also our national security.  The threat is no longer a problem for our children and grandchildren.  It is our problem now. Thanks to the rapidly accelerated spending started under Bush and carried on by Obama, our day of reckoning is only one or two presidential terms away.  It begins as soon as the Fed raises interest rates:

The following graph is the federal budget in 2011 as per the CBO:

And the following are the tax reciepts for 2011:

When looking at the above graphs of the US balance sheet, two things stand out:

  1. There is a gap of $1.295 trillion between the numbers.  The wealthiest nation in the world was taxed at one of highest rates (in relation to GDP) in its history in 2011 and produced $2.303 TRILLION for our masters to do what they need to do.  They ended up spending 156% of that amount.  This has been the story since 2008 and isn’t giving any sign of letting up soon.
  2. The graph doesn’t include Obamacare and the extra $500 billion of additional annual interest we’ll be paying by 2018, after the fed raises interest rates to more “normal” levels.  Austerity anyone?  Who and what are we cutting to make this happen?  Social Security? Medicare? Infrastructure?

This isn’t a lofty discussion of politics or conjecture.  It is simple math.  By the time your kids entering college are out looking for a job, we will be facing Greece-like cuts.  Your money will be going toward a return for Chinese debt holders, not updating the bridge you cross every day or hiring a teacher at your local school.

The two pies presented above should be in the back of our minds every time a politician speaks.  This our balance sheet.  Ask yourself how long we could survive spending 156% of what we make… because that is exactly what each and every one of us is doing right now.

 

Demagogues, Debt, and Atlas Shrugging

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from The People’s Cube

Obama’s pre-election story is that taxing the rich is the key to funding the government and reducing the debt. Even his greatly expanded government will be financed by the rich paying their fair share.

This story is for people who do not understand anything at all about current government spending and the staggering size of our debt. Obama’s story is for uninformed voters. The question is, do the uninformed represent a majority yet?

Lying about the revenue available from taxing “the rich” may get votes, but it won’t change reality. Do the math. There is not remotely, in your wildest dreams, enough money to cover the spending of this government with increased taxes on top earners. The math has been explained many places, including here, and here, and here.

Obama’s proposed ‘tax the rich’ plan will solve about 5% of our deficit problem. And that assumes that productive people will not change their behavior in response to higher taxes, an unlikely assumption. Mike Flynn has just written a good summary of the absurdity of the plan. Others have shown that even if you take all the income from the top 1%, you can only finance this bloated government for a few months. And then what? The golden geese will be dead. Where would you get eggs next year?

France is going to learn this lesson ahead of us. France just elected a Socialist President who rode the class envy train to power. He is promising to tax top earners at 75%. Socialists have the delusion that you can take most of the product of someone’s labor and the person will keep working just as hard. Reality has never worked that way and never will.

Now, France’s richest businessman, Bernard Arnault, is leaving the country. As Daniel Greenfield reports, This Atlas is Shrugging. Arnault, the head of Louis Vuitton, employs 100,000 people in France and around the world. Many other people of substance are fleeing France. The French “Liberation” newspaper reported Arnault’s departure with this headline: “Get lost, rich bastard!”

Yes, you golden geese, you get the hell out. And Liberation people, talk to me in a year or two about how your socialist delusion works out for you. I already know how it works out because this is an old movie with a tragic ending. Reality always bats last.

Another aspect of overwhelming debt that is not discussed often enough is the close relationship between debt and national security. When Admiral Michael Mullen was chairman of the Joint Chiefs of Staff, a reporter asked him to name the most significant threat to U.S. national security. His response was, “Our debt”.

On Monday, speaking to a panel of former members of Congress, Admiral Mullen elaborated on the dire implications of America’s fiscal path to our national security:

“A nation with our current levels of unsustainable debt, being this far out of fiscal balance, cannot hope to sustain for very long its superiority from a military perspective, or its influence in world affairs. That was not intended as a partisan statement then, and it has no partisan meaning now. I was using our growing and unsustainable debt as shorthand for the abundant disorder in our fiscal house, brought upon us, by ourselves, by our own doing. While much has been said since then, little has changed. In fact, I would argue that the mere passage of time, combined with a lack of solutions in the interim, has compounded the problem, as our debt increases seemingly exponentially, and solutions that require compromise seem a figment of the imagination.”

From Hale to Obama: How Far We’ve Come…

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In September 1776, Nathan Hale, a 21-year-old soldier of the Continental Army, volunteered to go behind enemy lines in New York City in order to spy on British movements in the area.  General Washington needed to know what route the British would be taking to lay siege to Manhattan and believed that the only way to know was to send over a spy.  Hale was a newly minted first lieutenant in the Connecticut militia and had not yet been in combat.  When the request came from General Washington, he was the sole volunteer.  Despite knowing the punishment for spies was swift execution by hanging, his sense of patriotic duty far outweighed the risks to his life.

Shortly after he ferried over to the British position in Long Island, the Brits invaded and took over Lower Manhattan and forced General Washington to retreat to the northern side of the island.  Despite disguising himself, the young inexperienced spy was identified in a pub by a British loyalist.  Nathan Hale was lured into a revealing his identity by the man and arrested in Queens on September 21, 1776.  He spent the night in a prison where he was denied a bible or clergyman.  The next morning, a highly composed and stoic 21-year-old Hale was led to the gallows where a noose was placed around his neck.  The only courtesy extended to those guilty of spying was the allowance of final words before pulling the noose tight:

“I only regret that I have one life to give for my country.”

Though barely out of college and without children of his own, Nathan Hale went to his death proud of his decision to defend liberty for his country. Since his death, many thousands of Americans have followed his selfless path in defense of our lives.  These people have never met the millions of Americans for whom they are giving the ultimate sacrifice.  They do it based on a belief that they want to leave a better world to their children and fellow countrymen… and that that is worth everything.

Hale’s story and those like it lie in stark contrast to what we saw out of our current president Tuesday night who spent his evening on a comedy talk show in leu of dealing with our country’s current crisis:


After deflecting all responsibility for the deficit he doubled to his predecessor, Obama went on to talk about how a certain class of people should “sacrifice” more to pay for the problem.  Hundreds of billions of our current and future tax dollars were spent by his administration to shore up union pensions and strengthen his constituencies.  This is a man who chose a Reverend who preached we got what we deserved on 9/11 and a wife who said she didn’t feel any pride in American until her family was running the show.  Rather than reach across the aisle and come up with a solution to our nation’s problem, he dug in his heels and funneled money to his constituency.  His ”apple of discord” approach to politics is shamelessly pitting Americans against each other to gain favor:  He won over the AMA by saying the primary care doctors deserve more than surgeons… Wall street was blamed to gain favor with Main street…  Rich are blamed for making money off the backs of the poor.  If there is any political gain to be won by demonizing a minority group of his fellow Americans, Obama doesn’t hesitate.

Is this the legacy Nathan Hale was imagining when he held his head high for the hangman’s noose?

Time For the Invoice

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So, what is the cost to each of us and our children for the spectacular job Bush and Obama have done prolonging, I mean, saving us from certain doom and destruction?  A group from Stanford economists from the Hoover Institute lay out the numbers for us in the WSJ today.  If it doesn’t frighten you then you are obviously one of our international readers (welcome to www.realitybatslast.com!)

The Magnitude of the Mess We’re In

9-18 Update by Bryce- Reading this column about the ‘Mess We’re In’ prompted two thoughts:

1. Who in their right mind would want to be the Captain as the USS Titanic tries to make it’s way forward through these waters? None of the problems enumerated in the article have easy solutions; just very painful and difficult ones. And if you are a conservative Captain, the press will be sabataging every move you make.

2. Republicans would be wise to avoid the Messianic thinking that swept Obama into power. Dear Leader cannot make these problems go away. Not Obama; not Romney. Turning this big ship around will take much more than the election of a new Captain. A new Captain is necessary, but certainly not sufficient.