The Tax Cut Deal

Once again, the Republican “leadership” demonstrated why they will never have more than a losers mentality. A 2 month extention? Really? How exactly does a business react to that?

I swear to _od, if there were a way to kick them all out at once, I’d be the first one in line leading the way. This current political class is killing our country. At some point, we need to throw them all out and start all over again. I believe the time is now. Hell, why wait. Take DC by storm and don’t let them in their offices or the Hill. A lot less damage will be done to the country by not having them there than letting them “do their job.”

Tim Tebow Does IT Again

Like many NFL fans, I watched a lot of Thursday night’s game with absolute horror…until there was seven minutes left and the Broncos had the ball on their 5 yard line. Once Eddie Royal escaped from the grasp of Jim Leonhard at the goal line and rambled for a 9-yard gain, I told my 9-month old daughter sitting with me to sit back and enjoy. Neither of us was disappointed.

Denver’s performance was remarkable. How do you come up empty so many times to only get it right at the end? I’m not sure if it’s divine intervention or what, but Tebow has the “IT” factor. Anyone who has played sports knows the people on their team that had IT. They were always the hardest workers laying it on the line all the time, making you push yourself even further than you normally would. The result, you end up performing better as a team than you would otherwise.

If you look at the stats, there isn’t a whole lot of difference between the stats pre-Tebow and post-Tebow. However, the whole team seems to be performing at a higher level, especially the defense. Some of the defense’s improvement can be attributed to the guys  getting use to Fox’s schemes, but that doesn’t explain it all. Now, the three and outs of the offense span a longer time period given the propensity of the team to run with Tebow rather than throw with Orton.

To all of you haters, let’s go over a few facts. First, with a Tebow at quarterback, the defense can’t go 11 on 10. Tebow is just as likely (perhaps, more likely) to pull the ball on a read and take it himself than he is to give it to the running back. Therefore, there is a defensive player that has to follow him. As a former running back, you have to love it..one less potential tackler. Second, the guy is a kid. I’m not sure if you haters have gone back to look at Elway’s first few seasons, but they were nothing statistically to write home about and were about where Tebow’s completion averages are.  Third, it looks to me as though Tebow is throwing some balls away intentionally further killing his completion average but not turning the ball over. Finally, the team’s winning, something it wasn’t doing early in the year.

So, to all you haters, I understand why, but let’s give the kid a break and see how he develops. If is successful in the NFL, it will be one more example of the American work ethic. Perhaps, some of the #Occupy movement can learn from him.

 

It’s the Culture Stupid

Rich Lowry had an article in Friday’s NY Post titled Stuck at the Bottom. The article discusses whether the American dream is dead or if its people still have upward mobility. During this time of OWS, it is timely. It posits that American does worse than other countries at getting citizens up from the bottom. While you should read the whole column, this paragraph is a salient one:

“This stagnation is less a statement about the structure of America’s economy than about its culture. As Ronald Haskins, also of the Brookings Institution, wrote in an essay for the publication National Affairs, “economic mobility is constrained above all by personal choices and behaviors.” He argues that society’s leaders “should herald the ‘success sequence’: finish schooling, get a job, get married, have babies.” If Americans finished high school, worked full time at a job that matched their skills and married at the rate they did in the 1970s, the poverty rate would be cut 70 percent.”

If the diversity crowd would start fostering things that matter rather than things that don’t, we all would be in a much better place.

Eugene Robinson Is Wrong

Eugene Robinson’s Investor’s Business Daily article It’s Clear GOP Had Its Fingers In Downgrade demonstrates within itself how ridiculous his titled proposition is. The thrust of his piece was that the GOP’s threat not to raise the debt ceiling without spending cuts is what caused S&P to downgrade the U.S.’s credit rating.

However, he states in the body of the column that “There is no plausible scenario under which the U.S. would be unable to service its debt.” His assertion is correct, unless President Obama decided not to pay the bondholders. If you recall, it is Obama that screwed the G.M. bondholders in favor of the unions with his shills on the bankruptcy court tagging along. How one could ever prioritize the union claims over secured bondholders flies in the face of commercial dealings? On to that, stack Obama’s 60-Minutes interview wherein he says “we won’t be able to pay our bills…” you then have a credible threat of non-payment.

Without a debt ceiling increase, the U.S. Treasury would have had to make choices about who to pay and who not to pay since the cash coming in does not exceed the planned expenditures. Commercially, one would prioritize bondholders ahead of other creditors, but, with this administration, you’re not really sure what might happen. Again, this raises the specter of non-payment.

The fact of the matter is that S&P knows that the “cuts” really are not reductions in spending, but simply reductions in the increase in spending. Their downgrade really is a shot across the bow of the CBO, congress and the administration in how it does its accounting. Only in government would not spending one dime more than last year be characterized as a cut. S&P is laughing at the CBO’s scoring of the plan and the purported trillions of cuts. In fact, had congress arrived at a plan not to raise spending at all over the next ten years, the CBO would have scored this as a $9 trillion cut. When in fact, there was no cut at all.

S&P knows that the only thing the government can control is the amount of money it spends. If it raises tax rates and people make less, the take to the treasury might be lower than under the lower tax rates. You’re seeing this all the time with the tobacco tax increases which continue to raise less money as people are forced to quit. What happens to the program once the funding is dried up? Instead of the program going away, the program ends up being funded by the general fund. S&P knows this.

S&P also understands that the current pact does not bind congress next year. Who can forget Democrat promises to Reagan to cut spending if he went along with their tax rate increases? He agreed to the tax rate increase, but the Democrats never came through with the spending cuts. As a matter of fact, spending went up. History repeated itself under Bush 1, and Mr. Robinson wonders why any credit rating agency would believe anything coming from a government official’s mouth.

Mr. Robinson also quotes Mr. Greenspan’s comment that we “can always print more money.” It is true that we could print our way out. However, there is nothing that requires our trading partners to take our devalued currency. How would we trade? Further, the inflating the supply of our currency should cause interest rates on the treasury bongs to rise substantially thereby exasserbating the problem. S&P knows this.

As can be reasoned from the above, the U.S. is not AAA rated and hasn’t been for some time. The only thing I will give S&P credit for is the guts enough to state what most of us already know: The U.S. government is nothing but a ponzi scheme paying off old investors with new investor’s money.

One is left either believing that Mr. Robinson has very little understanding of accounting, economics and budgeting, or he was simply trying to prey on traditional Democrat Party constituencies putting fear in their hearts. Either way, he’s wrong.

Coming Soon to America

The BBC, Sky News and others are reporting on the riots going on in the UK. Take a good look America, because soon this will be coming to our shores.

You cannot beat into the heads of several generations that their problems, economic issues, and unemployment are due to another segment of the population (i.e. the rich) without repercussions. While Europe is well ahead of us, we have made up ground quickly under Obama and the Democrat’s leadership of congress since 2007.

While Obama promised to unite everyone in the country, his rhetoric, and that of his party, has been anything but unifying. Obama and the Democrats have constantly used the tactics from the Communist Manifesto and Saul Alinsky in an attempt to divide and concur the citizens of the U.S. They succeeded in 2008 and have done exactly what they said they would do: attempt to redistribute wealth from the middle class to the lower class.

However, the policies that were suppose to help the poor have done exactly the opposite and sewn the seeds of discontentment into the middle and lower classes.

America, you reap what you sew.

Why Does the US Still Have a AAA Credit Rating?

That is a question I have asked myself for a long time. While it is hard to get a clear picture of the U.S. government’s financial position (i.e. it’s balance sheet), you can make a bunch of assessments simply by looking at its operating statements over the past 100 years.

One thing has become obvious, our political class continues to spend and make promises to pay benefits to citizens far beyond its ability to generate income to pay for them. While the majority of the promises are “off balance sheet,” they do represent future commitments that will require the government to pay money to its citizens or the citizens will have to do without a promised benefit.

Add to this the fact that government operations continue to run at a deficit, and you have what I believe is a looming default. I’m not sure when, or where, but this cannot be sustained into perpetuity. So, the U.S. government is left paying off and providing returns to existing investors with new investors’ money. Don’t people go to jail for that? Isn’t that called a ponzi scheme? Oh wait, that’s only if you’re in the private sector.

Once again, the credit rating agencies are late to the dance. They continue supporting their puppet masters by saying the U.S. must raise its debt ceiling to maintain its credit rating. While not raising the debt ceiling might cause a default earlier than if we had raised the debt ceiling, the legal authority to float more debt does not mean our credit is AAA. As a matter of fact, the fact that we can’t pay our bills as they are coming due without additional financing proves we’re technically insolvent.

While Bernie Madoff is characterized as a villain, he is no different than the politicians and bureaucrats over the last 100 years who promised benefits without a clear means to pay for them and without truly reflecting the cost of providing these benefits over the life time of the beneficiaries. Just as wrong were the inflated assumptions used in the models demonstrating the worth of the spending and programs.

In the private sector, these are considered crimes and you go to jail for them. In the public sector, you’re paid a nice income and benefits for life.

One thing is for sure, you don’t need to be a Harvard MBA to figure out something is wrong. You also don’t need a degree to figure out the U.S. government is not AAA rated. The rating agencies will get there one day, but, as was the case with Enron and others, it will be too late.

The “eat our peas” President

Why is the mainstream media trying to portray the person who drove the train off the rails as the savior? Whether you watch MSNBC, read the blogs of the Washington Post or CBS News, they are trying to help the White House position the President as trying to save us from this problem.

The President and his policies have created the economic circumstances we have. Remember, he and his fellow Democrats have not submitted a budget in two years so as to not to suffer politically from their actual policy goals. The Democrats continue operating under continuing resolutions in abrogation of their Constitutional responsibilities.

The mainstream media figures are calling Republicans terrorists or suicide bombers as they show their ignorance on economic matters and attempt to incite violence. Remember, liberals always say the words can cause people to react and act out. Remember the rhetoric after the Gifford’s shooting? Remember the Democrat’s and their mainstream media sycophants saying we need to be civil? Well, how is this incendiary language civil?

The keys to remember in the whole debate are as follows:

  • Talking about saving money over ten years really means saving nothing today.
  • Raising tax rates does not guarantee increases in revenue thereby reducing the deficit assuming spending remains at the same level. The projected revenue increases are fiction and should not be counted until realized.
  • Spending cuts do guarantee reduced deficits assuming all other spending remains constant.
  • There is enough revenue coming into the Treasury today to service the debt and stave off a default. Claiming otherwise is lying and an attempt to use they same tactic they used to create panic and pass Obama’s other spending programs.

Remember how TARP, QE 1, QE 2 and the other spending programs were passed? It was said that if we don’t do this, all will implode. Well, they’re trying the same here. Don’t believe them because they’re lying again. If they don’t pass the debt ceiling increase what will happen? Well, spending will have to be cut automatically so as to allow room to service the debt and repay the debt coming due. Perhaps, this is all a ploy to have this automatic spending cuts happen so as to get the fiscal house in order without actually having to vote on it in an attempt to provide political cover to the Democrats and allow the Democrats can blame the Republicans for this.

Note to Republicans: If there is ever time to take one for the team, it is now. You will be rewarded for standing firm. Let the cuts begin.

Spending Cuts vs. Tax Increases

The media is playing up the current debt cieling debate with the Dems and their media sycophants claim that you need to increase taxes to solve the problem. Well, let’s look at the two extremes of the argument.

As is quoted on a lefty blog Alternet, the net worth of the 400 wealthiest citizens was estimated to be $1.57 trillion. This would lead to a ONE TIME inflow to the Treasury of $1.57 trillion. The 2009 budget deficit was $1.4 trillion. This means that after barely covering the deficit for one year, the income taxes paid by these individuals would be $0 from that point forward. This would reduce the Treasury’s receipts increasing the deficit after year one.

Compare this to spending. If you did not spend anything, then current tax revenues coming into the Treasury was approximately $2.5 trillion which would be used to pay down the debt already incurred.

Obviously, by measuring the problem at the two extremes to determine where the problem is, we have a spending problem, because income is what it will be. There is very little control the government has over how much it will receive in taxes in any one year. There are many varilables that go into the equation. Spending is something that can be controlled.

Easy solution, we should limit spending in any year to the prior year’s tax receipts.