FedUpUSA

Archive for the ‘Fiscal Responsibility’ Category

Government promises to public employees have created “zero-risk” Wonderlands protected from the market forces of risk and consequence. These islands of privilege are snapping back to join the real economy.

Every government entity that reckoned it was moated from the market economy will be snapped back to “discover” risk and consequence. Let’s lay out the dynamic:

1. Every government can only spend what its economy generates in surplus.

2. Every government transfers risk and consequence from itself, its employees and its favored vested interests to the citizenry and taxpayers.

3. Every government collects and distributes the surplus of its private sector to its employees, favored constituencies and vested interests.

4. Since the government (State) promises guaranteed salaries, benefits and entitlements to its employees and favored constituencies, these individuals believe they are living in a risk-free Wonderland that is completely protected from the market economy.

5. Risk cannot be repealed or eliminated, it can only be masked or transferred to others.

6. The Federal government and the Federal Reserve have pursued a policy of inflating serial speculative credit-based bubbles.

7. These bubbles inflated assets, profits and taxes, creating the illusion that blow-off speculative tops were “the new normal.”

8. Speculative credit-based bubbles misallocate capital and incentivize malinvestment on a spectacular scale.

9. Once the bubble deflates, the capital is lost or trapped in illiquid malinvestments.

10. As a direct result of the dot-com bubble, Stockton’s tax revenues (general fund) leaped to $139 million in 2001. As a direct consequence of the housing bubble, it jumped to $186 million in 2007.

11. This “new normal” encouraged the belief that the stock market would double or triple every decade into the future, generating 8%+ annual returns for public union employee pension funds.

12. The city government granted employees open-ended guarantees of lifetime healthcare coverage.

13. This meant that there was no limit on the cost of each employee’s benefits.

14. As noted here many times, healthcare costs rise by 7%-10% every year, even as the economy which supports healthcare grows by 2% on average.

15. Healthcare alone will bankrupt the nation, and the bankruptcy of entities that promised open-ended healthcare is merely one manifestation of the coming bankruptcy of the entire sickcare/entitlement Status Quo.

16. Once the stock market reverts to the mean and is revalued to the “new normal” of global recession and low earnings growth, it will decline by 40% or more and yields will remain around 2%.

17. Pension funds earning 2% at best based on expectations of permanent 8% returns cannot sustainably pay the benefits promised.

18. If the city attempts to make up the shortfall annually, the services provided to the citizenry will be gutted. The risk and consequence of malinvestment and favoritism has been offloaded onto the citizens while those protected by the government moat live “risk-free” lives of guaranteed pensions and benefits.

19. The public-employee pension and healthcare benefits were separated from the market economy with this government guarantee: regardless of what happens in the real economy, you will be paid pensions and benefits that have zero exposure to the market economy and private-sector pensions/benefits.

20. In effect, the government has placed its employees and vested interests in a moated “risk-free” zone outside the market economy. The risk that is distributed to all participants in an open market (i.e. a democracy) is transferred to the citizens and taxpayers.

21. Any government that siphons off an increasing share of its taxpayers’ disposable income (to distribute to the privileged few) in return for declining services will eventually be overthrown by the citizenry and taxpayers who must bear the full consequences of the city’s mismanagement of their capital and income.

22. Every city, county and state in the U.S. which has secured a risk-free wonderland for its favored few will “snap back” into the real economy and face the discipline of the credit market and the “discovery” of price and value.

23. Risk cannot be eliminated by government mandate, it can only be transferred to others. No government entity can maintain a “risk-free” fortress outside the market forever. The moat around Wonderland will be drained or filled, regardless of what promises were made.

24. Government has no mechanism to transparently price risk, value and return on investment. The market will “discover” all these and re-set government services and salaries accordingly.

How Stockton went broke

Charles Hugh Smith – Of Two Minds

We have all been lied to.  For decades, the leaders of both major political parties have promised us that they can fix our current system and that they can get our national debt under control.  As the 2012 election approaches, they are making all kinds of wild promises once again.  Well you know what?  It is all a giant sham.  The United States has gotten into so much debt that there will be no coming back from this.  The current system is irretrievably broken. 30 years ago the U.S. debt was a horrific crisis that was completely and totally out of control.  If we would have dealt with it back then maybe we could have done something about it.  But now it is 15 times larger, and we are adding more than a trillion dollars to the debt every single year.  The facts that you are about to read below should set America on fire with anger.  Please share them with as many people as you can.  What we are doing to our children and our grandchildren is absolutely nightmarish.  Words like “abuse”, “financial rape”, “theft” and “crime” do not even begin to describe what we are doing to future generations.  We were the wealthiest nation on earth, but it wasn’t good enough just to squander all of our own money.  We had to squander the money of our children and our grandchildren as well.  America has been so selfish and so self-centered that it is hard to argue that we don’t deserve what is about to happen to this country.  We have stolen the future of America, and yet we strut around as if we are the smartest generation that ever walked the face of the earth.

All of this prosperity that we see all around us is just an illusion.  It is a false prosperity that has been purchased by the biggest mountain of debt in the history of the world.

Did you know that if you added up all forms of debt in the United States and divided it up equally that every single family in the country would owe more than $683,000?

We are a nation that is absolutely addicted to debt, and the U.S. debt crisis threatens to destroy everything that our forefathers built.

Yes, everything may seem fine for the moment, but what do you think would happen if the federal government suddenly adopted a balanced budget?

1.3 trillion dollars a year would be sucked right out of the economy and we would be looking at an “economic readjustment” that would be mind blowing.

Enjoy this false prosperity while you can, because it is not going to last.

Debt is a very cruel master, and our day of reckoning is almost here.

The following are 34 shocking facts about U.S. debt that should set America on fire with anger….

#1 During fiscal year 2011, the U.S. government spent 3.7 trillion dollars but it only brought in 2.4 trillion dollars.

#2 When Ronald Reagan took office, the U.S. national debt was less than 1 trillion dollars.  Today, the U.S. national debt is over 15.2 trillion dollars.

#3 During 2011, U.S. debt surpassed 100 percent of GDP for the first time ever.

#4 According to Wikipedia, the monetary base “consists of coins, paper money (both as bank vault cash and as currency circulating in the public), and commercial banks’ reserves with the central bank.”  Currently the U.S. monetary base is sitting somewhere around 2.7 trillion dollars.  So if you went out and gathered all of that money up it would only make a small dent in our national debt.  But afterwards there would be no currency for anyone to use.

#5 The U.S. government spent over 454 billion dollars just on interest on the national debt during fiscal 2011.

#6 The U.S. government has total assets of 2.7 trillion dollars and has total liabilities of 17.5 trillion dollars.  The liabilities do not even count 4.7 trillion dollars of intragovernmental debt that is currently outstanding.

#7 During the Obama administration, the U.S. government has accumulated more debt than it did from the time that George Washington took office to the time that Bill Clinton took office.

#8 It is being projected that the U.S. national debt will surpass 23 trillion dollarsin 2015.

#9 According to the GAO, the U.S. government is facing 34 trillion dollars in unfunded liabilities for social insurance programs such as Social Security and Medicare.  These are obligations that we have already committed ourselves to but that we do not have any money for.

#10 Others estimate that the unfunded liabilities of the U.S. government now total over 117 trillion dollars.

#11 According to the GAO, the ratio of debt held by the public to GDP is projected to reach 287 percent of GDP by 2086.

#12 Others are much less optimistic.  A recently revised IMF policy paper entitled “An Analysis of U.S. Fiscal and Generational Imbalances: Who Will Pay and How?” projects that U.S. government debt will rise to about 400 percent of GDP by the year 2050.

#13 The United States government is responsible for more than a third of all the government debt in the entire world.

#14 If you divide up the national debt equally among all U.S. taxpayers, each taxpayer would owe approximately $134,685.

#15 Mandatory federal spending surpassed total federal revenue for the first time ever in fiscal 2011.  That was not supposed to happen until 50 years from now.

#16 Between 2007 and 2010, U.S. GDP grew by only 4.26%, but the U.S. national debt soared by 61% during that same time period.

#17 During Barack Obama’s first two years in office, the U.S. government added more to the U.S. national debt than the first 100 U.S. Congresses combined.

#18 When you add up all spending by the federal government, state governments and local governments, it comes to 46.6% of GDP.

#19 Our nation is more addicted to government checks than ever before.  In 1980, government transfer payments accounted for just 11.7% of all income.  Today, government transfer payments account for 18.4% of all income.

#20 U.S. households are now actually receiving more money directly from the U.S. government than they are paying to the government in taxes.

#21 A staggering 48.5% of all Americans live in a household that receives some form of government benefits.  Back in 1983, that number was below 30 percent.

#22 Back in 1965, only one out of every 50 Americans was on Medicaid.  Today,one out of every 6 Americans is on Medicaid.

#23 In 1950, each retiree’s Social Security benefit was paid for by 16U.S. workers.  According to new data from the U.S. Bureau of Labor Statistics, there are now only 1.75 full-time private sector workers for each person that is receiving Social Security benefits in the United States.

#24 The U.S. government now says that the Medicare trust fund will run out five years faster than they were projecting just last year.

#25 Right now, spending by the federal government accounts for about 24 percent of GDP.  Back in 2001, it accounted for just 18 percent.

#26 If the U.S. government was forced to use GAAP accounting principles (like all publicly-traded corporations must), the U.S. government budget deficit would be somewhere in the neighborhood of $4 trillion to $5 trillion each and every year.

#27 If you were alive when Christ was born and you spent one million dollars every single day since that point, you still would not have spent one trillion dollars by now.  But this year alone the U.S. government is going to add more than a trillion dollars to the national debt.

#28 If right this moment you went out and started spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.

#29 A trillion $10 bills, if they were taped end to end, would wrap around the globemore than 380 times.  That amount of money would still not be enough to pay off the U.S. national debt.

#30 If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 470,000 years to pay off the national debt.

#31 If Bill Gates gave every penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for 15 days.

#32 According to Professor Laurence J. Kotlikoff, the U.S. is facing a “fiscal gap” of over 200 trillion dollars in the future.  The following is a brief excerpt from a recent article that he did for CNN….

The government’s total indebtedness — its fiscal gap — now stands at $211 trillion, by my arithmetic. The fiscal gap is the difference, measured in present value, between all projected future spending obligations — including our huge defense expenditures and massive entitlement programs, as well as making interest and principal payments on the official debt — and all projected future taxes.

#33 If you add up all forms of debt in the United States (government, business and consumer), it comes to more than 56 trillion dollars.  That is more than$683,000 per family.  Unfortunately, the average amount of savings per family in the U.S. is only about $4,735.

#34 The U.S. national debt is now more than 5000 times larger than it was when the Federal Reserve was created back in 1913.

But do our leaders care about statistics such as these?

No.

In fact, Barack Obama says that we need to raise the debt limit by another 1.2 trillion dollars.

The absurdity of raising the debt limit when we are already in so much debt is beautifully illustrated by the video posted below….

I just thought that video was so well done.

The “huge cuts” that Congress has agreed to are absolutely meaningless when compared to how rapidly our debt is exploding.

Calling those cuts “pocket change” would be an insult to pocket change.

But it is not just U.S. debt that is the problem.  The European debt crisisthreatens to completely unravel in 2012 and Japan actually has the highest debt to GDP ratio in the entire industrialized world.

In 2012, a total of 7,600,000,000,000 dollars of debt must be rolled over by the G-7 nations, Brazil, Russia, India and China.

That doesn’t even count new borrowing.  That number just represents old debts that are coming due that must be refinanced.

Anyone out there that insists that this debt bubble can be fixed under our current system is lying.

A massive amount of financial pain is coming.

It is time for Americans to wake up from their television-induced comas.

It is time for Americans to get very angry.

Your future has been destroyed and the future of your children and grandchildren has been destroyed.

You better take action while you still can.

The Economic Collapse

To wit….

“The present government has done absolutely nothing during the last 12 months to speed up privatizations, reduce the public sector or open up closed professions,” (elided), a leading economic analyst, told me recently in an interview. “In these 12 months it has not fired even one civil servant. The only thing it is doing is trying to tax the private sector out of existence. Why should we believe that they will do something different now?”

Oh wait….. we’re not talking about America in this regard, are we….

Oh yes we are.  The same disease infests us as infests Greece.  While Obama prattles on about hiring more cops, hiring more teachers, protecting the civil servants of all stripes — and not only during their tenure, but also in retirement — he at the same time proposes taxing the private sector out of existence.

Isn’t it funny how The Wall Street Journal is all to happy to print that OpEd regarding Greece, but not a word on the same subject in America?

One has to wonder.

Coburn has been called a “Tea Party Turncoat”, but is he?  How about Jim DeMint?

As I’m sure followers of my articles are aware, I’ve been extremely critical of what appeared to be a direct change from fiscal responsibility or anything like it (never mind cessation of knobbing the banksters) right into “GGG” – the shop-worn and tired “Guns, Gays and God” nonsense.

Well, perhaps some who claim to be “Tea” have realized that there’s no future in “GGG” if you try to use that as a sop for what you were elected to do?

Hmmmm….. maybe.

I have often said that when the facts change so do my opinions.  And it appears that perhaps – just perhaps – my opinions need to be revised, at least for a few Senators and Representatives.

Let’s start with Steve Southerland.  I’ve been very critical of him, going after him full-bore after what I considered a shameful and intentionally-misleading “presentation” he gave in Destin with Jeff Miller. He’s my “Critter” in DC, replacing the utterly worthless Alan Boyd this last election.

But he voted no on the Boehner bill.  While he did not completely explain what he would vote for in his press release, he did say this:

“I believe Speaker Boehner deserves credit for crafting the best solution he thought possible after enduring months of stonewalling and political parlor tricks from the President and Senate Democrats.  However, I am concerned that the House Budget Control Act hands President Obama a $900 billion debt limit increase without the guarantee of a federal balanced budget amendment or the trillions of dollars in spending cuts and caps necessary to protect America’s AAA credit rating.

Close enough for now.

Then there’s Coburn, who I Tickered earlier today.  His speech on the Senate floor needs to be heard by every American.  He’s spot-on and nobody in The House or Senate can honestly refute a word of it.  Kerry, who tried, simply made a fool of himself.  Click that link and watch it for yourself.  Yeah, he has been wrong before – TARP, for example.  But we all have erred and if we refuse to forgive sins when people’s actions change, we go nowhere as a country – or as individuals.

Finally, we have DeMint, who the AP is reporting on:

But unlike the fractious movement as a whole, DeMint is specific and focused on what change, exactly, he wants: passage — not just a vote — of a balanced-budget amendment to the Constitution. Without it, he says, no consideration should be given to raising the nation’s borrowing limit. Even, he says, if the country runs out of money for paying all its bills after Aug. 2.

There it is.  The correct position, in my view, and exactly what those who originally began sending Tea Bags and otherwise raising hell have all been about since the beginning (myself included) – no more government “hot checks” and games.  No more “baseline” budgeting that would land you in prison anywhere except in Congress.  No more claims of “cuts” when they’re spending increases.  No more bailouts, which are simply more “hot check” games.  And no more providing services we are unwilling to fund with current tax revenues.

I’m sure I’ve missed a number of Senators and Reps in here and I can’t possibly cover them all individually – after all, there were other “NO” votes in The House.  Among them where Michele Bachmann and Connie Mack.  The full list of Republicans who voted against, all of whom can be presumed to be demanding an actual balanced budget, is:

Justin Amash (Mich.), Michele Bachmann (Minn.), Paul Broun (Ga.), Jason Chaffetz (Utah), Chip Cravaack (Minn.), Scott DeJarlais (Tenn.), Jeff Duncan (S.C.), Trey Gowdy (S.C.), Tom Graves (Ga.), Tim Huelskamp (Kan.), Timothy Johnson (Ill.), Jim Jordan (Ohio), Steve King (Iowa), Tom Latham (Iowa), Connie Mack (Fla.), Tom McClintock (Calif.), Mick Mulvaney (S.C.), Ron Paul (Texas), Tim Scott (S.C.), Steve Southerland (Fla.), Joe Walsh (Ill.), and Joe Wilson (S.C.).

While there are still plenty of liars in Congress, including people like Jeff Miller (R-FL-1) who claim to be a “fiscal conservative” yet voted for Boehner’s fraudulent claim of “cuts” it also appears we have a few people who claim to be “Tea Party” affiliated and/or fiscal conservatives who have found religion.

I don’t care where they found it or why.  Maybe they read all the Tickers I’ve been faxing to them the last couple of weeks; some have gotten a whole load of them.  Maybe they sat down with Excel, as I’ve challenged everyone in Congress to do for four years, and simply run the numbers.  Some of them recently got a targeted “care package” coordinated by myself, Steph’s FedUpUSA and Bill Still, addressed and sent by a cadre of Patriots on Tickerforum who all deserve a standing ovation for their efforts – and maybe those Congressfolk actually read and viewed the material.  Maybe they heard a voice in a “burning bush” or maybe they woke up in a cold sweat and realized that all the lies, obfuscation and games were running out and their political necks were headed for the guillotine known as the “Ballot Box” next year.

Whether their enlightenment came in a church, in a field, reading Tickers, watching videos and reading printed letters, waking in a cold sweat, praying on their own or with others in the House as it was said some of them were doing before the Boehner vote, it doesn’t matter.  What matters is that it happened and that there is a small but growing group of Senators and Representatives who have had their “Come to Jesus” experience on what we must do as a nation.

If you’re a person of prayer, now is the time.  To stiffen these men and women’s backbones and enlarge their gonads.  Pray that a love of true freedom, fiscal reason and responsibility ring like brass church bells and their resolve not fail.  That the truth – the cold, hard mathematical truth that cannot be avoided and must be faced be explained to the American people head-on.  And that the very public and essential debate be held by and with the American people on exactly what services we are willing to pay for with taxes in the present tense, dollar-for-dollar, and that the Federal Government be cut back to exactly that size and not one federal employee or department beyond it.

Winston Churchill once said that “Americans will always do the right thing ….. after they have exhausted all of the alternatives.”

Well, we’ve exhausted all the alternatives.

It’s time.