FedUpUSA

Archive for June 18th, 2010

By Karl Denninger

You have to chuckle at the so-called “commentators” and “reporters” and “idealogues.”  Listen to this:

Here’s the transcript, if you care to read it….

Guess what: Senator Simpson is correct and Alex is, as usual, trying to spin this issue.  Here’s reality:

Want to argue the facts?  Sounds good.  Let’s do so.

Blow up the above pie chart (click it.)  Notice that the so-called “pre-funding” that the 1983 commission allegedly did was a lie.  The government took all that money and spent it, rather than hanging onto it.  That is, they stole it.

Then the government got even more clever, and manipulated the CPI so as to prevent the indexing that is built into the law from reflecting the loss in purchasing power.

There is no surplus from the Social Security funds and it is not separate.  The government took the money and blew it.  It’s gone.

I don’t care what Alex believes Social Security is (or how many other people believe the same thing); the Supreme Court has in fact ruled that Social Security (and Medicare) is just a tax and can be changed at whim (or even eliminated entirely.)  Social Security and Medicare are not an insurance program and they are not an annuity, despite the commonly-held beliefs of the public.  The programs themselves are nothing more or less than political promises, and we know how often those are kept.

Here’s the reality of the surplus (or deficit) as a whole, including Social Security, going back to the 1990s:

Notice that Clinton’s so-called “surplus” wasn’t real.  He stole the Social Security surplus and spent it.  He wasn’t alone, incidentally, as both Bush’s did too, as has Obama – when he could.  Now, however, Social Security has actually generated monthly deficits, and although it is projected to start returning surpluses again for a short while, it doesn’t matter as the government will simply continue to steal and spend it.

There is no “lock box” where the Social Security funds are kept away from the rest of the government.  If Peter robs Paul but Peter and Paul both live in the same house and eat out of the same fridge, there is no net change in wealth between Peter AND Paul.

So again, with a $4 trillion budget 1.5 trillion of that, or 37% of it, is borrowed – that is, not funded.

Looking at the pie chart, where would you like to get that 37% from?

Well, you can’t get it from interest payments, and indeed right now that interest payment is extremely small due to the very favorable short-term rates – indeed, it’s lower today than it was in 2007.  That won’t stay nearly so favorable, incidentally, so one must plan for that slice of the pie (4.63%) to expand, not contract.

You can take the entire rest of the chart above the interest and remove it – that is, every discretionary spending item and department – and you don’t get here.  Indeed, doing so only consumes about 19% of the budget – but you need double that, approximately.

Which sacred cow(s) would you like to slaughter and BBQ?

Let’s assume that we cut all discretionary programs, without exception, by 20%.  This will produce howls of protest, but we’ll assume we can do it.  We now have 4% of the 37% we need.  Let us also further assume interest rates return to reasonable long-term averages (that is, we don’t get Greece’d) which means interest expense roughly doubles.

Discretionary cuts of 20% of the budget and interest expense increases balance – net zero.

So we need to find 37% of the budget in the “sacred areas” to eliminate.

If you eliminate the Department of Defense, you only get halfway there.

That’s ridiculously unrealistic, so we’ll instead assume that the lefty dream comes true tomorrow, every threat we have to our national security disappears with a wave of Harry Potter’s wand, and we can bring every troop home right now.  This might shrink the DOD budget by half, which would be extraordinary.

Congratulations, you still need to eliminate 27.63% of the budget.

If we eliminate Social Security, we don’t get there – it’s only 19.63%.  Doing so isn’t going to happen, of course, as Granny will grab her shotgun if you try it.

So let’s assume we do not touch Medicaid and Social Security – after all, it’s unfair to get rid of either base pay for old people or medical care for the poor and (especially) the children, and besides, there’s a real risk of an insurrection if you attempt do do either.  Fine and well, but then you must eliminate all unemployment, welfare and other mandatory spending plus Medicare (health care for old folks.)  That adds up to 28.92% – just enough, plus a couple percent for a (tiny) surplus of about $80 billion.

See the problem yet?

What Alex Lawson wants, along with the rest of the left, can’t happen.

It can’t happen because the math doesn’t work.  It is not about “mean people”, it’s not about “tax cuts for the rich”, it’s not about “sacred defense programs.”

It’s about mathematics.  You need to find $1.5 trillion in budget savings and there is no way to get there without digging deeply into promises that were made by the left but cannot be kept, because they were unfunded when made and worse, the very same government STOLE all the temporary surpluses the programs generated and spent them!

President Bush papered over the reality when it was 1/3rd as bad as it is now.  He did so with lies and deceit, and President Obama has now compounded that error by a factor of three, and appears to have built in a $1.5 trillion structural deficit where Bush’s was $600 billion or so.  Neither was able to be funded in perpetuity, and instead of fixing Bush’s idiocy in driving straight toward the cliff at 50mph when President Obama took office he floored it and now we’re doing 150mph – in the same direction.

The math doesn’t care whether you like what it says or not.

It just is.

The Market-Ticker

By Philip Klein

In order to protect the new national health care law from legal challenges, the Obama administration has been forced to argue that the individual mandate represents a tax – even though Obama himself argued the exact opposite while campaigning to pass the legislation.

Late last night, the Obama Department of Justice filed a motion to dismiss the Florida-based lawsuit against the health care law, arguing that the court lacks jurisdiction and that the State of Florida and fellow plaintiffs haven’t presented a claim for which the court can grant relief. To bolster its case, the DOJ cited the Anti-Injunction Act, which restricts courts from interfering with the government’s ability to collect taxes.

The Act, according to a DOJ memo supporting the motion to dismiss, says that “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.” The memo goes on to say that it makes no difference whether the disputed payment it is called a “tax” or “penalty,” because either way, it’s “assessed and collected in the same manner” by the Internal Revenue Service.

But this is a characterization that Democrats, and specifically Obama, angrily denounced during the health care debate. Most prominently, in an interview with ABC’s George Stephanopoulos, Obama argued that the mandate was “absolutely not a tax increase,” and he dug into his view even after being confronted with a dictionary definition:

OBAMA: George, the fact that you looked up Merriam’s Dictionary, the definition of tax increase, indicates to me that you’re stretching a little bit right now. Otherwise, you wouldn’t have gone to the dictionary to check on the definition. I mean what…

STEPHANOPOULOS: Well, no, but…

OBAMA: …what you’re saying is…

STEPHANOPOULOS: I wanted to check for myself. But your critics say it is a tax increase.

OBAMA: My critics say everything is a tax increase. My critics say that I’m taking over every sector of the economy. You know that. Look, we can have a legitimate debate about whether or not we’re going to have an individual mandate or not, but…

STEPHANOPOULOS: But you reject that it’s a tax increase?

OBAMA: I absolutely reject that notion.

At the time Obama made that statement, the Senate Finance Committee had just released its own health care bill, which clearly referred to the mandate penalty as an “excise tax.” But in later versions, the word “tax” was stripped, because it had become too much of a political liability for Democrats. The final version that Obama signed did not describe the mandate as a tax, and used the Commerce Clause — not federal taxing power — as the Constitutional justification for the mandate.

“”This is an about face from what is laid out in the law,” said Karen Harned of the National Federation of Independent Business, which joined the Florida lawsuit against ObamaCare. “In the text of the healthcare law, the findings for passing an individual mandate specifically rely on the effects of individuals on the national economy and interstate commerce. Nowhere in the findings is the mandate referred to as a tax. The Justice Department is now calling it a tax to try and convince the court not to rule on whether or not Congress exceeded their authority under the Commerce Clause by legislating that all citizens must purchase private health insurance or face a penalty.”

Put another way, the administration is now arguing in federal court that Obama signed a massive middle-class tax increase, in violation of his campaign pledge.

The American Spectator