Archive for the ‘federal budget’ Category

How Obama Gets Re-Elected in 2012, Part 4

HowObamaGetsReElectedIn2012Part4   <–  PDF version

Governor Romney chose Representative Paul Ryan of Wisconsin to be his Vice-Presidential running mate.  This was a good policy choice on Mr. Romney’s part, since Mr. Ryan is known as a serious thinker on the nation’s debt and deficit problems.  Mr. Ryan had previously put forth a plan to reduce spending and promote economic growth, probably the two most serious problems facing the nation today.  Granted, it is only a plan, likely to have some defects, and no plan survives intact after budget negotiations.  But at least it is something in writing to talk to and debate.  Choosing Mr. Ryan shows that the Republicans are attempting to get serious about the nation’s finances: if Mr. Obama had a budget plan, surely we would have heard about it by now after more than three years in office.

But Mr. Romney is engaging in the most amateur sort of wishful thinking if he believes that Mr. Obama will allow himself or his supporters to be baited into having a genuine discussion about issues.  A discussion about facts is the last thing Mr. Obama and his Party want; they have never won on that basis before.

The attacks on Mr. Romney have proceeded apace, somewhat in line with my predictions in part 3 of this series (23 Apr 2012).  The most recent focus is on Medicare.  Mr. David Axelrod, Senior Advisor to Mr. Obama’s re-election campaign was all over the Sunday morning talk shows claiming that the Romney/Ryan budget plan would “end Medicare as we know it”.  This is earth calling Mr. Axelrod, repeat, earth calling Mr. Axelrod: Medicare “as we know it” has already been changed via Mr. Obama’s Patient Protection and Affordable Care Act (“Obamacare”), which decreases funding for Medicare by about $700 billion over the next decade.  Perhaps it is too much trouble for Mr. Axelrod to read the legislation his Party has already passed.  Mr. Axelrod went on to complain that Mr. Romney and Mr. Ryan were out of touch with regular Americans on the Medicare system.  He said on NBC’s Meet the Press (12 Aug 2012) that the basic issue facing the voters was to evaluate the Republicans on the basis of “do you believe in Medicare or do you not  …..  I don’t believe they [Romney and Ryan] believe in that program”.

Why should any voter believe in Medicare?  The members of Congress don’t (Republicans or Democrats), the President doesn’t (nor his predecessors, regardless of party), and neither do any of their senior staff.  Members of Congress are covered in retirement by the Federal Employees Health Benefit Plan, a system of private health insurance, same as they have while in office. How many of them will give up the private plan for Medicare after they retire?  It is worse than that: all of the aforementioned persons and their families are exempt from Obamacare as well (probably the only part of the bill they actually verified before voting for it).  Only when our ruling elites have demonstrated their faith in Medicare will they be eligible to sit on their high horses, look down their noses at us, and lecture us that it is our patriotic duty to “believe in Medicare”.  The only way to establish the true cost of anything is to let the market set the price.  When the government intervenes, as in Medicare, the true costs are distorted generally upward, and the government picks winners and losers to compensate.  Presently, it is the doctors and hospitals that are chosen to take the loss on caring for the elderly.

This is one example of the mindless hypocrisy that will further enable Mr. Obama to be re-elected, in this case, by scaring the elderly.  The pro-Obama mainstream media will of course pretend not to notice.  But we cannot blame the media entirely.  A suitably large number of American voters have bought into the free-lunch theory offered by Marxism; they vote accordingly, and we get the ruling elites we have.

I have outlined many reasons in this series why I think Mr. Obama will win re-election.  It seems he is vulnerable only if the U-3 unemployment rate goes back above 8.5%, or another financial meltdown occurs, or the stock market declines more than 20%.  The tide of Marxism in America is otherwise too strong.

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A Note on the Budget Impasse, Part 2

A_Note_On_The_Budget_Impasse_2   <== PDF version

We’ve all heard the news about the “budget deal”.  Congress passed, and the President signed, the “Budget Control Act of 2011”, which averts the immediate prospect of a “default on the federal government’s financial obligations” by raising the “debt ceiling” about “$2.4 trillion” while “cutting spending” by a guaranteed $0.9 trillion over ten years, plus an additional $1.2 trillion in “additional cuts” which are to be specified by a “Select Committee” required to report its recommendations by 23 Nov 2011; if this Committee cannot agree, or Congress does not pass a list of “spending cuts”, then the $1.2 trillion in “spending cuts” will go into effect “across-the-board”, “divided evenly” between “security” and “non-security”.

Before we celebrate too much, let’s keep in mind that the federal government was already planning on spending levels that would increase the national debt from about $14.3 trillion to about $24 trillion over the next ten years.  Secondly, “discretionary” refers to all the things the Congress has allowed itself year-to-year control over, which happen to be all the things authorized by the U. S. Constitution.  Third, “non-security” is a code word for “entitlements”, often called “mandatory” spending because the payments are automatic, even though no such power to enact them is mentioned in the U. S. Constitution.  So, “discretionary” spending refers to all the things that the government is constitutionally authorized to do, “mandatory” spending is all the things the government is not constitutionally authorized to do.  If that seems strange to you, rest assured that it makes perfect sense to the people in Washington.  Fourth, “default” means that the government would not have the cash flow to meet all the promises it has made, and would therefore have resulted in politicians actually having to make all those “tough choices” they always brag about.  Fifth, Congress has traditionally changed the rules on these types of deals after the fact; usually the overall spending goes up no matter what.  Sixth, for those unfamiliar with it, a debt ceiling is the total amount of debt the government allows itself to obligate the taxpayers in the long run.

With these useful definitions in mind, let me restate my opening paragraph again, but this time the phrases in quotes will be in accordance with their true meaning:

We’ve all heard the news about the “smoke-and-mirrors swindle”.  Congress passed, and the President signed, the “Business as Usual Act of 2011”, which averts the immediate prospect of a “politician having to do his job” by raising the “actual total debt” to about $21.9 trillion while “pretending to cut spending through promises to reduce the rate of increase” by a guaranteed $0.9 trillion over ten years, plus an additional $1.2 trillion in “accounting gimmicks” which are to be specified by a “bipartisan group of entrenched party hacks” required to report its recommendations by 23 Nov 2011; if this Committee cannot agree, or Congress does not pass a list of “less-than-desired-increased-spending-levels”, then the $1.2 trillion in “less-than-desired-increased-spending-levels” will go into effect “targeted at enemies”, “according to which faction has the political advantage” between “constitutionally necessary tasks, which they don’t care about” and “entitlements, which they are afraid to discuss”.

As I speculated in my first essay on this subject (11 Jul 2011), this bill is full of the usual deceptions, delays, and artifices.  There will come a day, however, when real choices have to be made.  The longer it is put off, the more painful it will be.  As the people in Washington seem to be comfortable with these do-nothing illusions, they will no doubt continue to do so for as long as they can borrow another dime, after which there will be a Very Unpleasant Reckoning.

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A Note on the Budget Impasse

A_Note_on_the_Budget_Impasse  <== PDF version

Most of us have heard about the big “budget debate” in Washington between the leaders of the two major political parties.  The Washington establishment and the media are telling us that it is necessary to achieve some kind of long-term budget agreement in the next few weeks or else the U. S. will default on its obligations by 2 Aug 2011.  Now of course, the government has a lot of money rolling in each month – more than enough to pay interest on the debt that is due each month.  So, defaulting on our $14.4 trillion debt is actually a matter of choice.  What the politicians want us to believe is that come 2 Aug they will be able to pay only part of their obligations and renege on the rest; i.e., they will have to “default” on something. But it will certainly not be interest payments on the debt (that would cause real economic problems), what they mean is that some interest groups, some corporate welfare queens, some individual welfare recipients, or some illegal aliens will not get all the free goodies they have been promised out of our pockets.

I for one don’t believe it, on the grounds that no one, not even two-bit party-hack politicians, could be stupid enough to delay resolving this issue until a few weeks before the Big Event.  If it is true that they knowingly and willfully delayed all this time, recognizing months in advance that such an event would be triggered by their inaction, the proper remedy is for them to resign in disgrace for dereliction of duty.  That can never happen.

Mr. Obama and Mr. Boehner, as leaders of their respective parties, have been haggling (we are told) over a long-term “solution”.  At one point, it was to be a $4 trillion “solution”, involving spending cuts to the largest budget items (Social Security, Medicare, and defense) to be augmented by tax increases on the middle class and the wealthy.  Supposedly, Mr. Obama’s Democratic allies rejected any talk of reducing those entitlements, while Mr. Boehner’s Republican allies rejected any talk of tax increases; hence they are now struggling to come up with a “small” $2.1 trillion deal.  But, we should remember that no one in Washington, regardless of party, ever gets around to actually cutting spending.  If they cut a deal, the tax increases would go into effect immediately, whereas the spending cuts would be scheduled for ten years from now and would simply never happen; this is exactly what occurred during the tax increases of the Reagan and G. H. W. Bush eras.  It is even worse than that: when the “deficit hawk” Republicans gained control of both houses of Congress in 2000, the first thing they did, and continued to do, was to increase spending just as the Democrats had done.  I would be leery of any so-called “solution” according to the usual formulas.

In the end, the big-money, big-vote-getting interests obtain their desires through exemptions, exclusions, subsidies, outright gifts, and unfunded mandates on the states, while the average guy continues to lose ground or stay where he is.  That said, I may be fairly conservative, but I would not be opposed to a “provisional” tax increase to help deal with the debt.  “Provisional” in this context is understood to mean a tax increase devoted only to reducing the debt.  But, to guard against the political trickery of the past, I would remain in favor of a tax increase only under the following caveats:

a.  Revenue increases shall be imposed only by a payroll tax, which may be graduated and scaled for total income (i.e., the rich to pay more, the poor less); this eliminates loopholes to aid the politicians’ favorite friends.

b.  In year 1 of the budget deal, spending will be cut by “X” amount, without any increase in marginal tax rates.

c.  In year 2, of the budget deal, tax rates may be increased to approximate “X” from the year before.

d.  The same formula as above shall prevail for all succeeding years, that is, the amount of additional revenue in a given year shall not exceed the budget cuts of the past year, as compared to the year before that.

Only then can we be assured that the spending cuts are real; secondly, we will have a solid metric by which to evaluate the magnitude of the subsequent tax increase.  The politicians will complain that the additional revenue will come too late; that people will suffer in the initial cuts.  Poor babies; maybe they should have given that some consideration before they ran up our credit card to $14.3 trillion; just a thought.

Now that I’ve mentioned tax loopholes, I would also like this budget deal to address the complexity of the tax code, which exists only to benefit special interests and politicians’ favorite puppies.  Therefore, I require, as compensation of my taxes going up, a reduction in the volume of the tax code according to the following schedule:

a.  50% reduction in tax code volume within the first four years

b.  An additional 50% reduction (to 25% of current) in the next succeeding four years

c.   An additional reduction (to 12.5% of current) in the next succeeding four years.

In order to ensure Congress and the IRS comply with these restrictions, I require a provision by which all income and payroll tax withholding shall cease if Congress and the IRS refuses or is unable to meet the above reductions.

None of these ideas have any chance of passage, of course.  But it will be entertaining to see what our illustrious leaders foist on us this time.

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Facts Concerning the National Debt

Facts_Concerning_The_National_Debt <== PDF version

26 Jun 2011

Dear readers:

This document contains a table showing the growth of the U. S. national debt and gross domestic product (GDP) for the fiscal years 1929 to 2010 inclusive.   It is available only in pdf format.

You may find it handy when you hear politicians and party hacks discussing the debt and making various claims about the benefits of one policy or another.  This little table will provide you with the actual historical facts from which to check their data.

Thanks,

EDD

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