Time for Some Economic Truth Telling

I have something to say to the politicians and the buffoons in the media. “Enough with the lies and the spin and the mis-information! The fraud you are perpetrating on the American people is (or should be) criminal.” For years now, we’ve been told that Reagan ran massive deficits unnecessarily; that Bill Clinton created a surplus; that the Bush tax cuts of 2003 caused the current debt crisis; and my least favorite, that all we need today is tax increases to get out of our current fiscal mess. Using the chart above, and in only 800 words, I will completely disprove each of these idiotic opinions. They are progressive myths perpetrated in an attempt to justify an ever larger U.S. government. So in order:

The deficits of the Reagan years aren’t pretty, but they pale in comparison to the sheer madness of today and more importantly, they had a purpose. When Mr. Reagan took office the Country was in a quagmire financially and militarily and the policies of his administration brought us out of both and to new heights never seen before in America. During his entire Presidency, Democrats held a death grip on Congress and its purse-strings. They could have stopped all that ‘horrible spending’ any time they wanted to – they didn’t. Trust me when I say, I hate deficits, but as deficits go, these had a usefulness at least. Things were accomplished. For the debt incurred, the country gained peace with its greatest-ever threat, the Soviet Union as well as new-found economic prosperity.

Bill Clinton is the luckiest President in U.S. history. He was a philanderer in the only moment in history when one might get away with it – that is after the country gave up its morals and before blogs, twitter, facebook etc. which might have led to a very different outcome (look at Anthony Weiner – his actions were nothing compared to Mr. Clinton’s and he was ridden out of town on a rail). On the financial front, he rode an economic boom driven by the internet to government financial nirvana and he and his progressive friends continue to take credit for something they had virtually nothing to do with. Look at the chart; it’s right there in red and blue. From 1984 to 2000 Federal revenue more than doubled. Tax cuts from the 80’s and the resulting economic crescendo capped by the tech-boom drove federal tax receipts through the roof. Did he pay down the debt? Nope. Instead, Washington spent more money than ever before in the nation’s history. Though they tried very hard, Mr. Clinton’s administration couldn’t spend it all and a small surplus was left over.

Along comes President Bush. He campaigns on returning the American people’s money (remember now, despite the progressives’ slight of hand tactics to make you forget this fact, it is our money)  to them via tax cuts. Coupled with the tech bubble bursting and 9/11, this leads to a drop in Federal revenue and a return to annual deficits. But, wait; look what happens next. Revenues explode upward starting in 2004 and reach the highest in our nation’s history in 2007. How can this be? I’ve been told repeatedly that the Bush tax cuts ruined this country. I’m sure it must be true; I mean, MSNBC says so. Sorry, liberals, wrong again. Mr. Bush is not blameless however. He presided over a federal spending bonanza that out-paced all the income gains created by the tax cuts. But, Progressives don’t argue against the ‘Bush spending’ however. That wouldn’t work with their agenda of always spending more; so they say the tax cuts are to blame. Think what they are actually saying – “We wanted to spend all the money we did spend, PLUS all the money Bush gave back in tax cuts”. Incredible!

Last lie, “Tax increases will get us out of this”. What?!?! The current tax code is virtually identical to that of 2007. That means we have a tax system in place today that produced the largest single year Federal revenue in American history. That isn’t enough for them? They need more? Look at the chart again. In the imaginary years to come, Mr. Obama is counting on Federal income reaching all new highs. And even if it does, he still expects to run $500 and $600 BILLION deficits EVERY YEAR!  He wants to increase taxes in the hopes of increasing revenue (despite all the evidence that it doesn’t work that way), not to get our budget balanced and pay down some debt. No, that would be far too sensible for Washington. These morons want to increase spending even more. They want to go to all-new record levels of spending. I guess they’ve never heard of the idea of cutting back when times are tough.

There you have it; four lies of the left debunked. Where does that leave us? I’ll leave that for another time, but there are some lessons here for those willing to see. How does 2007 revenues with 1999’s spending sound? The result is a $900 billion annual surplus. $450 billion per year of that could go to debt reduction and $450 billion to replacing the money Washington has robbed from Social Security. That sounds like a good place to start.

They Are For It, After They Were Against It?

To hear Democrats, and particularly the President, tell it, we must raise the debt ceiling immediately and to do anything other than raise it $2.4 trillion no questions asked, is “dangerous”, “irresponsible”, “risky”, “playing with fire”, etc. Mr. Obama went so far as to pull out the old liberal stand-by, i.e., scare the old people,  telling them Social Security checks may not go out if this isn’t done immediately.

Whoa, hold on a minute. Did the President of the United States just threaten citizens with taking away their own money? Haven’t we been told our whole lives that Social Security is a trust fund? You mean they can just not give our money back to us if they don’t want to? Hmmm, no conservative has ever warned you about that have they? Don’t worry, seniors, this is an idle threat. Social Security wouldn’t be the first, tenth or probably fiftieth thing cut if/when the government runs out of money. But the fact that he said it ought to really give America pause. That is if we were listening.

Back to the pending doom of not raising the debt ceiling. Interestingly, in 2006, all 45 Democratic Senators, including then Senator Obama, voted against raising the debt ceiling. The increase being discussed then was a paltry $780 billion, but today when raising it more than 3 times that amount is on the table, they would have you believe it is a mere formality and conservatives are being silly to hold it up. Heck, the President has gone so far as to say not raising it would be irresponsible. Really, Mr. President? Then what the hell were you and your cronies up to in 2006?

According to Democratic Senate Leader Harry Reid in 2006:

“Any objective analysis of our country’s fiscal history would have to conclude this administration and this rubber-stamping Republican Congress are the most fiscally irresponsible in the history of our country. In fact, no other president or Congress even comes close.”

Here’s more of his rhetoric from way back… ooops, just five years ago:

Oh Harry, what’s that expression about the pot calling the kettle black? So, in 2006 Republicans were being irresponsible for raising the debt ceiling $800 billion, and today they are being irresponsible for not raising it TWO point FOUR TRILLION! I guess Democrats got their John Kerry impersonation mixed up and they are for it after they were against it.

The country is fiscally doomed and this kind of “leadership” is exactly why.

What Do NBC News and Barack Obama Have in Common? Neither One Understands the Deficit

Last night I watched in utter disbelief as a news report on NBC Nightly News claimed the President was going to shave $4 trillion from the $14 trillion deficit over the next ten years. Why is this shocking? Because the $14 trillion isn’t a deficit (an annual shortfall in revenues compared to spending) but rather the nation’s debt (outstanding monies owed). Furthermore, the President’s campaign speech – I mean detail deficient “plan” – doesn’t cut one penny from the $14 trillion national debt. Instead it merely cuts $4 trillion from planned future spending over the next 12 years.

[Side note: this is the first time any Washington nitwit has gone out 12 years with a budget (it’s normally ten) and, of course, was done to pretty-up a very ugly picture.]

I can hear you now, “$4 trillion is nothing to sneeze at”. Well, look at it this way – that’s only $340 billion per year and when you’re going backwards $1.5 trillion per year as we are now, that’s not going to even make a dent in this crisis. Politician’s talk in these big numbers over many years because it obscures the truth and they know it. They do silly things like tell you they’ll fix this massive crisis by raising taxes on the rich as the President did yesterday.

Newsflash, Mr. Obama – According to the IRS, the entire income of all Americans earning over $100,000 in 2008 was about $1.58 trillion. Even if  we taxed them all at 100%, it wouldn’t fix the problem. And, of course, taxing them at 100%, even 50% isn’t feasible as it will kill investment, economic growth and job creation; so please, I know it makes good campaign fodder, but can we drop that charade already? I’m begging you!

So, whether you’re NBC and are going to claim to be a national news service, or you are Barack Obama and claim to be qualified to be President, it would perhaps be good if you had ANY idea what you were talking about when it comes to the fiscal matters of this country. Feel free to call me if you need some help!

Representation Without Taxation Doesn’t Work Either

Today being tax day, it seems a good time to remind ourselves of some key figures. Most Americans give at least a cursory look at their household budget monthly as they pay their bills or perhaps weekly if they’re in the tough position of living paycheck-to-paycheck. But, few stop to review their country’s financial state even once a year. Perhaps that should become a tradition on tax day. After all, Americans would call their cell phone provider and dispute a $10 unexplained charge; so why do they continue to pay thousands each year without asking why or where it’s going?

So here it is, the federal budget for the next ten years, as laid out by President Obama. Be sure to note, it is displayed in billions of dollars.

Allow me to round some figures off in summation: This year, the federal government will take in $2.2 trillion while spending $3.7 trillion (a $1.5 trillion deficit on top of the existing $11 trillion federal debt). Notice they expect the best year in the next ten, 2014, to still be a net loss of $706 billion, even if some wild optimism on Washington’s part comes to fruition.

This is the equivalent of an American family that earns $100,000 per year spending $168,000 while carrying $600,000 in debt; writing IOUs for the $68,000, and planning to do the same thing each of the next ten years and beyond. None of us would do that, so I can’t believe there’s a person in this country dumb enough to think the government’s numbers work, but there is. In fact, there are millions of them. A few of these work in the Lame Stream Media and will go on TV tonight and deride their fellow citizens who are at rallies all over the country today protesting this very spending lunacy, even though it seems the protesters are the only ones paying attention.

But how can millions of people who think the government’s budgetary suicide is ok? Well, that’s easy – 47% of all Americans pay NO FEDERAL INCOME TAX! Put simply, these people have no skin in the game. They are too short-sighted to realize that at the very least, their kids might some day have to pay this bill; or much worse, that a financial default by this country will mean financial pain for all – especially those who currently live off the taxpayer’s largess. Still, come election day, they have the same voting power as those footing the bill, and therein lies the problem. As Ben Franklin so accurately said, “When the people find that they can vote themselves money, that will herald the end of the republic.”

Taxation without representation was cause for a Declaration and War of Independence. Turns out representation without taxation doesn’t work so well either.

More Debt Anyone?

The federal debt limit is going up faster than my credit limit with Visa during the economic boom of the last decade. The difference being, just because Visa kept upping my limit, didn’t mean I was stupid enough to spend it! But Washington is. Yesterday Senate Democrats voted yet again to raise the federal debt limit – this time by $1.9 Trillion to a staggering $14.3 Trillion. That’s up from the previous limit of $12.4 Trillion which they’ve borrowed and spent all of. That’s right, your elected representatives have maxed out your country’s credit cards again and they’re back for more. Does anyone else find it incongruous that few if any Americans would put up with their teenager running up a big cell phone bill or a few hundred dollars in credit card debt, but these same Americans have no problem with their employees in Washington borrowing trillions in our name without the slightest inclination as to how to pay it back?

In this case, one might be tempted to ask ‘Why so much of an increase at one time’? The answer is simple – it’s politics, of course. You see, the government is on track, according to the CBO, to run another $1.4 Trillion in the red this year, matching 2009’s record setting deficit (that’s a record that was TRIPLE the previous high mark by the way). With this in mind, the Democrats wanted to raise the debt limit enough to prevent another such vote prior to November’s elections. They don’t want to have to bring you the credit card bill a month before asking for your vote. Quick math says they’ve given themselves a $500 billion margin for error. I wonder if that will be enough?

As California Goes…

Kudos to the voters of California who turned out yesterday and overwhelmingly rejected all 5 ballot initiatives that would have further leveraged the state’s fiscal future. In fact the only ballot initiative that passed (by a huge margin I might add) was Proposition 1F which makes it illegal for legislators to give themselves a pay raise when the state is struggling financially – now there’s some Common Sense!

So, what does this mean for California going forward? Put simply, it means they are in the kind of economic turmoil that this blog has been warning about for months. The kind of turmoil that was at the root of the Tea Parties back in April (despite the media’s idiotic attempt to tell you otherwise). The really bad kind of turmoil. Just read some of the highlights from this story by CBS’s Los Angeles affiliate (my emphasis added).

California’s chief banker said the state has been scraping by on loans and deferring payments for a decade.

The recession has revealed the depth of the structural imbalance between the revenue the state takes in and its spending obligations. Voters themselves are partly to blame, approving initiatives in years past that have created or expanded programs without identifying how to pay for them.

“One thing we do know is the voters’ wish list is a lot longer than the ‘I’m willing to pay for it’ list. People are going to have to rectify the two,” state Treasurer Bill Lockyer said.

As Carol Platt Liebau so effectively points out in her recent article, we can learn a lot from California. The state has legislated itself into a corner from which there may be no recovery topped by a $42 billion budget shortfall in fiscal year 2010 (yes, that’s billion with a “B”).  How did they get there? Some of the highest tax rates and most stringent business regulations in the country, extremely tough environmental standards that make it nearly impossible for business to operate profitably, rampant illegal immigration and a legislature who believed it was appropriate to spend the money of law abiding tax payers supporting those illegals, a teacher’s union that has become so powerful it practically runs the school system, and on and on.

Does any of this sound at all familiar? Here are a few hints straight from the Democratic Congress and President’s current agendas: Tax increases for the “wealthy”, Cap & Trade, immigration reform, the Employee Free Choice Act. California’s current crisis was brought on by an extremely progressive agenda; an agenda the Democrats in Washington now want to push on the entire country. Apparently they believe if it doesn’t work, just expand the program and the results will magically improve!

*Here’s another take from the Washington Times.

Citizens Should Keep Their Eye On the Ball

In sales circles, they call it the bait and switch. Maybe a better analogy is the common shell game hustlers will often run on a city street corner. Whatever one calls it, in political circles it is frequently used and extremely damaging. Yet, much like the shell game, no one ever notices what is actually happening, not liberals, not conservatives, certainly not the ‘main stream media’. The politicians in Washington and around the country have the citizenry looking at the shells moving blindingly around the table; meanwhile the coin is, quite literally in some cases, already in their pocket.

Even the most voracious news hound struggles to follow everything going on these days; there’s simply too much information. But most Americans are not voraciously following the news, and many more pay no attention at all. The politicians know this and are perfectly willing, even happy, to use it to their advantage. Because if Americans ever stopped and really paid attention… very, very few of our elected officials, regardless of party, would keep their jobs.

There are only a handful of things the federal government is legitimately empowered to govern over. Things such as providing security to its citizens from foreign threats and/or domestic criminals; managing legal immigration (there should be no illegal immigration hence the word illegal); providing a centralized, stable banking system including currency; controlling the public debt. Other, more debatable but generally accepted roles of the federal government are providing some level of welfare for those who genuinely need public assistance (and this number is a tiny fraction of those on the public dole today); guiding an effective education system; over-sight of interstate commerce; etc.

But what do the politicians do? They play the shell game. They have divided the voters, not on these important issues where there might be constructive debate. No, they have us screaming at each other about gay marriage, abortion, or whether the local High School should be allowed to call themselves “Indians” or not. Meanwhile, they are failing at virtually every task on their to-do list. The borders are as porous as a slice of Swiss cheese. Crime is far too high and our prisons are full of evidence of the governments failure to educate and employ. Illegal immigration is rampant. They all dropped the ball on managing the banking sector and then ran around blaming each other in an attempt to cover up their own ineptitude. Public debt is quickly reaching (if hasn’t reached it already) unsustainable levels that will likely bankrupt us. The American education system is an absolute joke! And the list goes on and on.

Our leaders from both parties have utterly failed. They have failed to accomplish ANY of the tasks assigned to them by the Constitution and the voters who elected them. We the People should be outraged. There should be riots in the streets or at the very least a complete housecleaning of all incumbents, regardless of party, at the next election. Instead, the citizenry is far too busy arguing about whether Adam should marry Eve or Steve. The shells keep flying around on the table and we keep watching, but as anyone who’s ever seen a street hustler in action knows, the game is rigged and the outcome is pre-determined – the “house” always wins.

How Much Does the Government Get?

Lately there has been a lot of discussion about the wealthy needing to pay more taxes. This always raises the question for me, why don’t the people doing all this talking make a donation to the welfare program of their choice if they feel so passionately about it? But, nope, they want to force others to do something they aren’t willing to do themselves. Then there’s the recent rash of the President’s nominees who were discovered to have not even met their minimum tax obligation, let alone paid any extra – they want to raise taxes on others, but they won’t even pay their own? Something seems wrong here.

But, I digress. The topic for today is how much does the government actually take from every dollar you or I earn, so let’s take a look. I will start with a nice round $100,000 in salary to make things easy. Now assuming you’re not self-employed, your employer will be paying 6.2% of your salary to Social Security and 1.45% to Medicare. That’s $7,650 above and beyond the $100,000 that your employer has to cough up in your name (keep that in mind the next time they turn you down for a raise – they could have paid you another $600 a month, but it went to the government). Of course, you have to match those contributions via Soc. Sec. and Medicare withholding, so that leaves you with $92,350.

Don’t get excited, we’re just getting started. Let’s move on to the big leagues – income tax. If you’re single and have no children to claim, the government will take a bite to the tune of $20,124 in income tax withholding (maybe they should call it hold-up instead of withholding) leaving you with $72,226. Next, your state will take a bite. In my state of Massachusetts that bite will cost you 5.3% or another $5,300 leaving you with $66,926. If you live in one of the major U.S. cities you’ll likely get hit with a city income tax as well, but we’ll leave that alone for now. So, to this point the government has received $40,724 and your clutching $66,926 of your hard earned money.

But, we’re not finished, not even close.  Here are a few more taxes most Americans pay and to generalize I’ve used the amounts I paid in 2008 as examples:

• Property tax – $3,100
• Communications (phone, cable, cell phone) -$138
• Gasoline (average 35¢/gallon -18.4¢ goes to the feds, the rest to your state) – $263
• Sales tax (assume 5% and $10,000 a year in purchases) – $500

There goes another $4,001 leaving you with $62,925.  But, there are still more taxes. Capital gains is a fun one; it’s where if you manage to save some of these after-tax dollars, and are brave enough to invest it, and are lucky enough to make a little profit, they have the audacity to take a percentage of that too! There are cigarette and alcohol taxes, travel taxes (many times 10% or more on hotels, airfare, rental cars, etc.), and the list goes on and on.

So, in the end your $100,000 salary nets you roughly $60,000 and your government rakes in $47,650. Seems like a pretty good deal for them since you did all the work. But, here’s the best part… You or I must find a way to pay our bills and save for retirement out of the $60,000. But, the government doesn’t bother with any of that; instead, they spend Trillions more than they take in resulting in a national debt that you will someday end up paying for. Better put some of that $60,000 aside just in case!

You Can Not Make This Stuff Up!

In the latest sign that the apocalypse is upon us the United States government is now providing free cell phones to people on welfare. I AM NOT KIDDING! Apparently a monthly check, free medical insurance, free or subsidized housing and food stamps is not enough.  No, now the American taxpayer is being forced to pay for free cell phones and free monthly minutes for qualifying welfare recipients. Since no rational person would believe this, here is some information from the site:

Lifeline Assistance is part of a program that was created by the government to provide discounted or free telephone service to income-eligible consumers. To help bring you this important benefit, SafeLink Wireless is proud to offer Lifeline Service. Through our Lifeline Service you will receive FREE cellular service, a FREE cell phone, and FREE Minutes every month! SafeLink Wireless Service does not cost anything – there are no contracts, no recurring fees and no monthly charges.

Any Minutes you do not use will roll-over. Features such as caller ID, call waiting and voicemail are all also included with your service. If you need additional Minutes, you can buy TracFone Airtime Cards at any TracFone retailer Walmart, Walgreens, Family Dollar, etc). SafeLink Airtime Cards will be available soon.

Your exact benefits, including the number of free Minutes you will receive, depend on the state you live in. Please enter your ZIP code to get the details for your state.

My favorite part is the free roll-over minutes.  My carrier doesn’t offer that benefit and my wife and I pay more than $200 per month!

No one is going to argue that those on welfare are living in the lap of luxury, and certainly some people genuinely need assistance for a period of time to stabilize their lives, but this takes all Common Sense and tosses it out the window. The U.S. is more than 11 Trillion Dollars in debt and has decided that giving out free cell phones is a good use of the money it doesn’t have. Well, at least everyone will be able to communicate as the Country spins down the drain.