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.

Obama Intentionally Destroying America

Say what you will, but the President has been true to to campaign promises. The problem is, many of those nieve voters who did vote for him thought his promise to change America was something positive. I guess it really depends on your view of what is good for America. If you view

  • systemically higher unemployment,
  • lower wages and wage growth,
  • higher costs of energy,
  • higher food costs,
  • higher costs of imports due to the deprciating dollar, and
  • reduced standard of living for your children and grandchildren

then you should love what Obama’s policies have done. The latest example is the new EPA regulations which we’ll discuss in detail in a later post.

If you recall, during his campaign, he promised to bankrupt the coal industry and raise the cost of everyone’s electricity. As the price of gasoline spiked, he said he didn’t have a problem with the price being over $4.00 per gallon only at that the price spike happened so quickly. Now, he has put into place regulations that will definately raise the price of electricity, which will raise the price of every good, service and product made in the U.S. I think this will further

So, those of you who voted for Obama, I hope you like the change you have put us through. As for me, I’m looking to head back to reality instead of the false land of liberalism that has been tried.

Solvency v. Liquidity

Michael Barone has an article in which he articulates a belief I have long held: We weren’t as rich as we thought we were prior to the current depression. The government tried all the tricks in the playbook to reinflate the bubble, the the good old market would have none of that. I submit that had we not tried all of those old tricks and just let the market fix the problems, we would be in a better position today and not another $5 trillion in debt.

We don’t have a liquidity problem. We have a solvency problem. Until the balance sheets of consumers and the federal/state/local governments get trued up, we won’t get out of this mess. Sellling this solution is difficult, especially with the economic illiterates on the Left and their voting block.

Obama gets bin Laden

News reports have it that Obama authorized a strike against the compound where it was believed that bin Laden was hiding. If the reports turn out to be true, then hats off to Obama for making the call to strike and continuing the hunt for Osama.

Hey, since I agree with Obama on this matter, am I no longer a racist?