Summarizing a Few Spending and Deficit Comparisons for Obama to Bush

The Tuesday, 20 January 2015 issue of Investor's Business Daily offered a few comparisons of George W. Bush's budgets compared to those of Obama in its Issues and Insights Section.  These observations are timely given that Obama's budget for 2016 would increase spending by $68 billion.  Every single year Obama's budget request exceeded that which was approved by Congress, while all but one year under Bush, Congress insisted on spending more than he requested.  Every one of Obama's budgets called for a higher deficit than wound up being approved by Congress.  This spendthrift Democrat Socialist posed as a much more fiscally responsible man than Bush in his first presidential campaign, consistent with his unsurpassed proclivity for the Big Lie.

If Obama's budgets had been approved by Congress, the USA would have a gross national debt $1.8 trillion greater than it is now.  If Congress had only spent as much as Bush requested, the increase in the national debt under Bush would have been $800 billion less.

Under Obama, the gross national debt has grown by $7.5 trillion already and it has nearly two years more to go up, compared to its growth under Bush of $4.9 trillion.  So if Obama had had his way, the national debt would have been $9.3 trillion greater in 6 years, while if Bush had had his way, it would have gone up $4.1 trillion on his 8-year watch.

Yes, the spending, the deficits, and the debt were all handled poorly in Bush's budgets, but they were handled even more recklessly under Obama's budgets.

Obama Cruelly Threatens to Withhold Social Security Payments

There is no cruelty to match that of a frustrated socialist yearning for control over the People.  Obama has told tens of millions of very frightened seniors on Social Security that if the Republicans do not cave-in and give him a blank check to continue spending massive amounts of taxpayer money and then add much more to the national debt, he may not send out Social Security checks in August.  This is probably an empty threat, but that does not diminish the brutality of it.

By any rational analysis, it is also an absurd threat.  In 2010, Social Security income was $677.1 billion according to the Social Security Fund Trustee's Report.  Social Security outgo was $584.9 billion, which means it had a surplus of income over outgo of $92.2 billion.  That surplus was used to help fund the massive deficit spending on all other government programs, as the Social Security surplus has been used for decades.  Because of this, of the $677.1 billion of income, $108.2 billion is interest on government bonds the Social Security Trust Fund bought to help the government finance its deficits in the general fund for decades.

The Obama administration wants to keep spending money it does not have on such things as

• the expenses of setting up the bureaucracy and rules for ObamaCare, 
• setting up the bureaucracy and rules for the Dodd-Frank finance "reform", 
• paying ethanol, windmill, electric vehicle, solar, and other "green" energy subsidies, 
• paying higher electric and gasoline bills because it is foolishly convinced by its own propaganda that man is causing a catastrophic global warming, 
• paying hordes of scientists to prove this false catastrophic man-made global warming hypothesis,
• persecuting business with reinvigorated threats of anti-trust actions, 
• putting more people on Medicaid and Medicare,
• paying bloated union wages on federal contracts,
• using the Labor Department to provide site requirements to companies for their expansions while considering only Union Shop states,
• using the Justice Department to promulgate injustice against the states and the people and discrimination against those not in government-favored minorities,
• funding universities that long ago became bloated with government money and stopped educating students,
• promulgating tens of thousands of new regulations which serve no useful purpose but to increase the power of bureaucrats over the People who do not have the time to read the regulations,
• and providing funding to the United Nations, the IMF, the World Bank and many other international institutions that do not like the U.S. and hate our Constitution and concept of individual rights.

Apparently, Obama is now telling us that he is so unwilling to stop such foolish spending that he is going to transfer more than the surplus in the Social Security Fund income out to cover these other expenses.  It is his decision to do this which will prevent him from sending out the August Social Security checks!  Actually, I do not think the law will even allow him to do this, but then he is accustomed to ignoring the law, so that does not mean he will not do it.

Let us suppose that he chooses not to use the federal income from income taxes, corporate taxes, capital gains taxes, tariffs, gasoline and cigarette taxes, and many other taxes to pay the $108 billion owed the Social Security Fund in current interest payments.  In other words, he might make payments on interest to the Chinese and to investors, but not to the Social Security Fund.  The Social Security surplus of $92.2 billion would then be turned into a small deficit of $16.0 billion.  If he then did not send out that $16.0 billion, but did send out the remaining $568.9 billion of checks, this would mean that 2.8% of Social Security payments would not go out.  But, there is no way that $16 billion shortfall due to the default on the interest payment would not be made up by any President not grasping at power as a lust-driven would-be dictator.

Obama's threat really has struck terror into the hearts of many Americans on Social Security.  This was a totally irresponsible and pernicious act on the part of this cruel and evil man.  It seems to take such people to be the strongest advocates of socialism.  Despite its pretenses of caring for the needs of some of the People, those who pursue this so-called ideal as a career are never actually caring people.

This entire fuss about the debt ceiling is due to the failure of the Senate to produce a budget for over two years.  The House would not produce one either until the Republicans took it over.  But, the Senate and the President have ignored their budget.  Since no agreement has been reached on what the government will spend in 2012, there is no basis for an agreement on what spending cuts will be made to reduce the deficit to some manageable proportion of our GDP.  All we know is that the record over the last three years was for the government to spend an average of more than 24% of GDP, while before 2008, the spending was below 20% of GDP.  Obama and the Democrats appear to want to continue spending much more than 20% of GDP even though that will mean huge on-going deficits.  Apparently, they intend that this funding will be the result of many more continuing resolutions on spending, so they will never have to recognize that the welfare and crony mercantilist government they want is not sustainable.  They can ignore the failure of big government socialism as long as they do not have to produce an actual budget.  Unless, of course, we collapse as Greece is and Italy may be on the verge of doing.

A 4% of GDP reduction in government spending is more than a $600 billion reduction per year.  It is clearly easy for the government to function at its 2007 spending levels, so there is no excuse for spending cuts that are not in the $600 to $700 billion per year range relative to the spending of this year and the two previous years.

The Hypocrisy of Democrat Caring - Inflation, Another of Many Examples

The Democrats always claim to care for the well-being of the poor and the middle class.  When we examine this claim critically, all we see is hypocrisy and the maneuverings of flim-flam artists in most cases.  Let us consider another such case.

When faced with a recession brought on by a spike in oil prices which then burst the housing and credit bubbles, the Democrats produced a huge porkulus bill to funnel more than $800 billion preferentially to their political followers, mostly overblown state and local governments, crony big business merchantilists, labor unions, trial lawyers, environmentalists, and community organizers.  This was a huge transfer of money from the productive private sector to the non-productive government sector and away from the jobs-producing small businesses of the free market.  The Democrats further restricted the free market with ObamaCare, so-called financial reform favoring big Wall Street firms over banks and financial companies of a smaller scale, threatened and real tax increases, cutbacks in coal mining and oil and gas extraction, and increased regulation burdens, especially by the EPA.  Job loss was quick to follow.  In December 2008, we lacked 15,287,000 jobs and by February 2011 we lack 23,108,000 jobs.  The Democrat control of the House, Senate, and White House quickly added a loss of 7,821,000 jobs, which was added to the 4,254,000 jobs lost in the second year they controlled the House and Senate in 2008.  The under-educated and low-skilled people the Democrats always claim as their own and to be so close to their hearts, were preferentially found among those now without a job.  The Democrats could not have done a better job of targeting them for grief and deprivation.

Also in keeping with Keynesian economic theory, long known to be balderdash, but much beloved by governments always looking for reasons to spend more money, the Democrats increased the money supply hugely.  Once that is done, avoiding a future bout of price increases is very nearly impossible.  Cutting back on the growth rate of the money supply, once the economy begins to respond to having increased cash, but decreased saving and investment values due to dilution, becomes painful to many.  Among the many who cannot cut back are the governments themselves.  To spend so much, they create huge new debt and that debt has to be financed.  Presently, the Federal Reserve Bank is buying 70% of U.S. Treasury notes!  Without a fundamental change in spending policies by the government, which it is clearly loathe to do given the unwillingness to reduce spending by even $60 billion in the face of a deficit for 2011 of about $1,600 billion, the Federal Reserve Bank will be the only buyer of U.S. Treasury notes for a long time.  They will lighten that obligation by causing inflation, so the debt becomes less burdensome over time.  This is a favorite way for governments to effectively tax the people, without having to pass a tax increase.

This has further consequences for those who are poor, out of a job, on fixed income, or are in the middle class.  Let us examine the consumer price index trends we are now seeing clearly:

Since July 2010, there have been only increases in consumer costs.  These increases are given in terms of annual rates so that adding the last 12 months given adds to 2.0%, but round-off loses 0.1% of the total 2.1% increase over the last 12 months.  The alarming message is that zeroes and negative numbers have been replaced since July with large numbers.  The average monthly increase since July has been 0.2875.  Projecting that alone forward would give us a consumer price index (CPI) increase from July 2010 through June 2011 of 3.45%.  Still more alarming is the fact that the trend is actually upward over that time.  It is more realistic to project at least a 4% increase in the CPI for this period.  Such an increase generates further uncertainty which will make businesses more reluctant to add employees.

 

These increases have been led by increased food costs and fuel costs.  Food and fuel costs are particularly difficult for the poor, those on fixed incomes, and even middle class families to bear.  As we know, medical costs continue their high rate increases, accelerated by ObamaCare. The hardship is increased when many more people are unemployed.  In 2009, the median U.S. inflation-adjusted household income fell 0.7% from 2008.  It is estimated that the median inflation-adjusted household income in 2010 was down by 1.0% compared to 2008.  Income has been going down and now prices, especially unavoidable ones such as food and fuel prices, are going up at a great clip.

Democrats, this is really the way to show how much you care for the poor and the middle class!  Your slip is definitely showing.  No, that would be much too nice.  That can happen to anyone, or at least any woman.  No, you are clearly revealed for the con artists you are.  You cannot put this flim-flam game over on the American people for long.  Surely they will catch on.  A 5% decrease in the ability to purchase goods and services (4% CPI increase, 1% income decrease) is hardly likely to go unnoticed.  Your snake oil is not working and sick Americans are going to notice they are becoming sicker.  You had better hightail it out of town, you flim-flam Democrat con men and women!  This is pure shades of Jimmy Carter replayed and the hopey-changey misdirection magic is not working anymore.

Obama White House: 8% Unemployment Until 2013!

Obama's economic advisers believe the U.S. unemployment rate will continue to be above 8% until 2013.  We have already had 17 months of unemployment above 9%.  We have had 20 months of underemployment above 15%.  Now Obama and his team are saying we will have another 32 months or so of unemployment above 8%!

Obama and the Democrats have had a series of economic advisers who have been unable to prescribe any actions to take on the economy which have been beneficial.  Instead of the obvious beneficial recognition that taxes on businesses and the wealthy are too high, Obama and team have insisted on one tax increase after another.  Instead of recognizing that business needs the freedom to produce and to provide services, Obama, with his clueless socialist philosophy, has insisted that businessmen and women are all evil, conniving slime balls, who must be evermore intrusively regulated by government bureaucrats.  Since the phenomenal growth of the government's spending from 2000 to 2008 with an increase of 66.7%, was not enough, Obama stole huge measures of wealth from the private sector with huge additional spending and with huge mandates. The mandates require businesses to spend much more money and time to provide what Obama regards as social services, but does not want to add to the federal budget and deficit.

If you wonder how the huge increases in actual federal spending are a drain on the private sector, it is because that spending will be paid for by the private sector through a combination of:

• Higher future taxes
• The loss of present and future property values on buildings, equipment, and facilities
• The unavailability of money for present and future investment in new plant, equipment, facilities, and training
• Higher interest rates on borrowed money due to inflation and increased business risk brought on by growing government, which is always a threat
• The lower value of the dollar, making resources and supplies from abroad more expensive
• The lower growth of the economy due to money for political purposes doing nothing to increase the productivity of the American worker and businessman
• The mischief of using some of the money to subsidize very uneconomic products such as ethanol, solar power, wind energy generation, and mandated health insurance as a means to dump the costs of these lunacies upon the private sector
• Huge increases in the time to provide government with much more paperwork and to keep many more records for such things as ObamaCare, energy use, CO2 generation, financial activities, and recording and filing 1099 Forms for every person or company more than $600 was spent with

As a businessman trying to rationally plan your future investments, the blizzard of federal spending, mandates, regulations, paperwork, and taxes is mind-numbing.  You stop dead in your tracks and say "I do not understand what is going on.  Clearly Washington is trying to kill my business.  I have to stop making decisions until I can figure Washington out.  But I do not have enough copious free time to do that.  Is that even possible?  What they are doing is so clearly lunacy.  I will just hold as tight as I can until this mess is somehow straightened out.  If it is not, then it is time to retire."

 Meanwhile, one thing you will definitely not do is hire anyone.  So, remembering that the one thing we can count on from the Democrat socialists is that they have no understanding of the economy and even less of business, especially small businesses, who is crazy enough to believe that unemployment will come down to 8% in another 32 months under their management of a very meddlesome and ubiquitous government.  So long as a clueless government guided by the theories of Marx, Alinsky, Mao, Castro, Chavez, and Mussolini has its hands in everyone's every pocket and its fingers in everyone's personal apertures, the unemployment rate will never again be less than 8%.

Unless the government pretends to give everyone a job as the Union of Soviet Socialist Republics used to do.  The good old USSR used to have three to six people watch one person work, but all were said to be employed.  Look where that got them.  That is not the fate Americans want.  The majority understand economics and the business of business better than do Obama and his economic advisers from academia.  They are about to overthrow his regime of childish and destructive control-freak meddlers into the workings of the very complex and very adult private sector of America.  The Socialist Party is going to lose 69 seats in the House of Representatives, giving the Republicans a substantial majority in the House and mercifully ending the Pelosi "You have to pass the bill to know what is in it" regime there.  The Republicans will come to have 49 or 50 Senate seats and look to end up with 33 or 34 governorships just in time for the decadal redistricting of House seats.

The Republicans, even given more resolve by Tea Party members, may not be able to undo all the ill-gotten gains of the socialists with only control of the House, but they can and should defund all of the mischief of that socialist program.  Will they have the guts and will the American People prove to be the Winter Soldiers who will stand with then to fight Obama?  It will come to that, because Obama is a committed socialist and his promise to fight viciously with fists and elbows is the only promise we will ever be able to count on from him.

Of course we will always remember these whoppers:

• I will cure disease throughout the world, stop the warming and stop the rise of the oceans.
• I do solemnly swear (or affirm) that I will faithfully execute the Office of President of the United States, and will to the best of my ability, preserve, protect and defend the Constitution of the United States.
• I will not increase your taxes unless you make more than $250,000 a year.
• If you like your health insurance, you can keep it.
• The health care reform bill will decrease the cost of your insurance premiums.
• The Stimulus Bill will keep unemployment below 8%.
• There are no earmarks in the $787 billion Stimulus Bill.
• The health care package will pay for itself.
• The ObamaCare fee is not a new tax.
• We have run out of places in the U.S. to drill for oil.
• I will not rest until the BP Oil Spill stops.
• The Finance Bill will provide transparency and end the risks and abuses that nearly collapsed the financial system.
• The health care bill will not increase the deficit by one dime.

We can count on him adding greatly to the list over the remaining two sad years of his occupancy of the White House.  The man is a joke and a tragedy.

If only the first black American President had been Prof. Walter E. Williams and his wife had retracted her promise to assassinate him if he ran for the presidency!  With his good understanding of economics and the limits of legitimate government, what a President he would have been.  With advice from his friends Dr. Thomas Sowell and Supreme Court Justice Clarence Thomas, that triumvirate would have saved America much misery and would have demonstrated why you do not write anyone off on the basis of identity politics.

Fear Makes Money and Credit Scarce

Steve H. Hanke, professor of Applied Economics at The Johns Hopkins University and Senior Fellow of the Cato Institute, wrote an interesting article entitled Money Dominates.  He notes there is a controversy going on in which some in the government or among Obama's advisors favor more government stimulus and some want an end to very high rates of government spending and so are considered to be for "austerity."

The stimulus spenders include Prof. Paul Krugman, Prof. Lawrence Summers (Dir. of the National Economic Council), Prof. Christina Romer (Chair of the Council of Economic Advisers), and Treasury Sec. Tim Geithner.  The austerity side is represented by Obama Senior Advisor David Axelrod, White House Chief of Staff Rahm Emanuel, and Dr. Peter Orszag (Dir. of the Office of Management and Budget).  Germany and most of the other G20 countries are now favoring austerity.

The Keynesians believe government deficit spending will be stimulative whether the spending is done by printing money or by borrowing.  Monetarists, such as Milton Friedman was, hold that government spending is stimulative when it is done with printed money, but may not be stimulative if financed with borrowing.  Usually, government deficit spending is done with a combination of printed and borrowed money, so it is hard to test who is right.  However, the Japanese experience of the 1990s did separate the two sources of deficit spending with only borrowed money and the economy continued throughout to drag and sink.  The other example was from 1992 - 1997 in the U.S.  The deficit spending was based on printing money then and the economy expanded.

Hanke notes that Prof. Tim Congdon studied a 28-year period for the U.S. and found that the number of years that the economy behaved as the Keynesians claim it should was half the number of years in which it did not perform as they claim it should.  So, it is clear the Keynesians are wrong and the monetarists are at least less wrong.  In our present recessionary case, broad measures of money have fallen.  This is why the $862 billion stimulus of February 2009 was so ineffective.  This is why the U.S. and Europe are stuck with sub-normal growth rates and will remain so for some time.

The money supply situation is given in the following table:

Several measures of the money supply are given and these become broader and broader as one goes down the rows.  In August of 2008, before the recession in the U.S., the Federal Reserve deposits were $0.84 trillion, but in June of 2010, it had increased this greatly to $1.9 trillion, or by a factor of 2.25!  Yet, M2, the measure of money representing the traditional bank deposit liabilities was a mere $8.6 trillion, rather than the $17.6 trillion that would have been the case if the same M2 multiplier to the Federal Reserve deposits applied as had in August 2008.

At least the M2 value had increased, but as we go to wider and wider measures of the money and credit supply, we find that the measures have shrunk instead of grown!  The shadow bank liabilities are those of investment banks, private equity pools, mortgage finance companies, and structured investment vehicles.  They are down.  The international positions of banks holding U.S. dollars are also down.  Finally, over-the-counter derivatives are down in value.  Money and credit are in short supply.

What has caused this decrease in the effective money supply for doing business?  Fear and uncertainty.  When FDR said that all the American People had to fear was fear itself, he was being much less than honest.  Those who understood business and the economy had much justification for fearing FDR and his arbitrariness, his mad experiments, his general ignorance of economics and business, and his disdain for business.  So to do today's businessmen have good reason to fear Obama and his Democrat Congress and for the same reasons.  The bankers and financiers are especially frightened and uncertain in the face of the new regulatory legislation which actually tosses most of the regulations into the lap of the bureaucracies to formulate over the next few years.  It will be some time before the bankers and financiers have knowledge once again on how they may and may not act.  For a long while they will have difficulty calculating the return of investments and loans, so they are sitting on more of their money until they can figure out what the future holds for them.  This is the rational thing to do.  Meanwhile, the recovery will be, at best, at very slow growth rates and little hiring will be done.  This is the consequence of fear and uncertainty.

Dems: We Don't Need No Stinking Budget!

The Budget Impoundment and Control Act of 1974 requires that a budget resolution be produced by 15 April each year in the House of Representatives.  The Pelosi House still has not produced that required budget resolution, let alone an actual budget.  First, the Democrats are divided.  One faction wants to spend lots and lots of money, none of which is covered by tax receipts.  The other faction wants to spend a little less.  Second, neither Democrat faction wants to go on record with an actual budget deficit and thereby allow easy and definitive projection of the national debt given the upcoming fatal elections.  If they produce no budget until after the election, they hope the bloodbath for the Dems will be lessened.  This is pathetic.

The Democrat chairman of the House Budget Committee complained when the GOP did not pass a budget resolution in 2006, "If you can't budget, you can't govern."  Now he and the Democrats are proving they cannot budget and cannot govern.  Obama is calling on non-security departments to suggest 5% budget cutbacks.  A Democrat proposal in the House for a 2% budget cutback will not get a vote on the floor of the House.  Without the budget resolution, each of next year's 12 spending authorization bills will have no limits. 

How Obama's Illinois Government Pays the Bills

According to the 4 June 2010 St. Louis Post-Dispatch, Illinois has a $13 billion over-spending problem.  This has created a terrible cash flow problem.  Actually, the state has had a severe cash flow problem for years.  How does it deal with this problem?  Well, logically, it should cut back its spending or it should raise taxes.  But, taxes are not popular just now and they chase people into the underground economy or away to other states with more reasonable taxes, so the government of Illinois has not raised taxes enough to deal with their shortfall.  What they do is pay their bills very late.  As of 2 June, the state comptroller's office admitted to being about $5 billion behind in paying its bills!

Independent pharmacies are still waiting for payments by the state on Medicaid  prescriptions that should have been made in January.  There are 240,000 late payments to vendors and schools and cities.  Some regular state vendors have not been paid since October.  The Illinois comptroller's spokesperson, Carol Knowles, says

Every day, all day, we hear from vendors who are requesting emergency payments to make their payrolls or to keep the lights on.

As a small business owner, I know how rotten it is to be faced with payroll and payroll taxes on work performed long ago for payments long overdue.  Not paying your bills in a timely way is an instance of fraud. Many states, especially Obama's Illinois, habitually resort to fraud.  This is how irresponsible overspending is sustained in Obama's home hood.  This is how Obama learned to govern as a state senator in the Illinois legislature.  Promise spending, engage vendors for their goods and services, and then say we will pay you when it suits our convenience.  Of course, the state absolutely requires its unpaid vendors to make on-time payments to the state of withholding taxes from the vendor's employee pay!  This makes state government fraud especially egregious.

It would appear the state of Illinois is counting on saving a lot of money by not paying many bills until many of their vendors have been driven into bankruptcy.  I suppose that bankrupt and unoperated companies are less likely to make those daily calls pleading for payments so they can keep their doors open.  What a neat way to overspend and never face the consequences.  There is a bit of a problem, however.  I would not do business in the future with such a customer.  Of course, elderly care operations may find it more difficult to do without state payments than a material analysis laboratory would, but soon many of them will be out of business and many elderly will not be cared for, including those not dependent upon state assistance.  The irresponsible state, claiming to be unable to reduce its spending out of concern for the poor, will soon have no way to claim it is helping the poor.  The means to deliver the services will have been killed.  It is the nature of the parasite to kill its host.

Medicare and Social Security Liabilities Prior to ObamaCare

Let us review the status of the Medicare and Social Security liability situation in 2009 according to the Social Security and Medicare Trustee Reports.  Their combined unfunded liabilities are $107 trillion!  To this, we are now going to add the liabilities of ObamaCare.  It is also important to note that the Congressional Budget Office was not allowed to calculate the cost of ObamaCare borne directly by the public, which it had done for ClintonCare.  For ClintonCare, 60% of the added cost was to be borne by the private sector, while only 40% was borne by the government, which of course taxes the private sector for that amount.  This is at least likely to be roughly true for ObamaCare.  So, the real price of ObamaCare will really be about 2.5 times the price admitted by the CBO numbers.  In the end, all of these costs will be borne by the private sector, even as the private sector staggers under the crushing load of previous commitments to Medicare and Social Security.

Pamela Villarreal, a senior policy analyst of the National Center for Policy Analysis, prepared an excellent and brief summary of the Medicare and Social Security future burdens in 2009.  Medicare and Medicaid spending has grown at an average rate of 2.5% faster than GDP since 1970.  So, they are taking more and more of our productive output year after year after year.  This retards GDP growth considerably.  Now, ObamaCare has just added greatly to the cost of Medicaid by putting at least 15,000,000 more people on that program.  But, we will ignore that sudden spurt in growth and just assume these programs will "plod" along with a growth rate in excess of GDP by 2.5%.  The consequences:

• Social Security, Medicare, and Medicaid would have consumed almost half of the federal budget by 2050, just as today's recent college graduates are nearing retirement.  Remember that much of the cost of Medicaid is passed on to the states, which are already staggering on the brink of bankruptcy in many cases under its burden.
• By 2082, Medicare alone will devour almost the entire federal budget.  Of course this is of no concern to most people now, since they will be dead by then.  But, today's children will be living in those dire times, unless the medical system is so deteriorated by then that life expectancy has shortened to that of the old Soviet Union or of Russia.

Let us consider the popular fiction that tax rates can be increased and people do not change their behavior.  Politicians who support tax increases like to make such projections to calculate the increase in tax revenues.  Of course, tax increases actually usually mean lower tax revenues over time, given the high rates we already start at now.  So, what tax rates are now needed to maintain all of the programs of 2009 in the federal budget at their current levels of spending under a balanced budget under the fiction that everyone will work as hard as now?

• The lowest marginal income tax rate of 10% goes to 26%.
• The 25% rate goes to 66%.
• The highest rate of 35% in 2009, which Obama now wants raised, goes to 92%.
• The corporate tax rate of 35% goes to 92%.

It would seem there soon will not be any wealthy people to shift the tax burden to for long. Imagine the entire middle class paying 66% of income to taxes!  There surely will not be a middle class for long either at these tax rates.  This was our future before ObamaCare made matters worse!

Let us look at an article from the Washington Post last year by Amy Goldstein on the financial problems of these programs.  She notes that the financial status of both Medicare and Social Security deteriorated at an accelerated rate in 2009.  This would largely be due to the recession and the shrinking payroll tax take that resulted as people lost jobs, went to shorter hours, and took pay cuts.  Of the two, Medicare is in the worse shape.  By 2017, Medicare will not be able to pay all of its hospital bills, which is two years earlier than was projected in the 2008 Trustee Report.  Social Security will be unable to pay retirees full benefits by 2037, which is 4 years earlier than was projected in the 2008 report.  That, I caution you, assumes the government honors the IOUs it has given the Social Security program for previous taxes it used for the general budget.  The situation has further deteriorated since the 2009 report was issued on 12 May 2009.  The part of the Social Security program for disabled Americans will run out of funds in 2020.  That report, however, predicted that the Social Security tax fund will begin to spend more money in 2016 than it takes in through the Social Security payroll tax each year.  As I recently noted, the recession has caused this milestone to be reached this year!

At that time, before the problems continued to become worse as this government-caused recession has dragged on and on, the Social Security problem, provided you consider the IOUs to be good and without problems, could be solved by increasing the payroll tax from 12.4% to 14.4% or by reducing benefits by 13%.  I believe increasing the tax rate will only lead to a compounded reduction of growth in the economy and is a bad idea.  The proper thing to do is to raise the retirement age enough to greatly reduce the costs.  People have been living longer and they are certainly more healthy at age 65 or age 70 than they used to be.  They can work longer.  Since they would then be working longer, they can continue to pay for their own health care costs longer also.  This is clearly the right and moral way to solve the financial crises of these programs.  Of course, I would also encourage programs to allow people to save and invest more, such as a huge reduction in government spending for many purposes, so people will have more take-home pay to save and invest.

Increasing taxes is not the answer.  We must become more hard-nosed and cut the many unconstitutional government programs so people can do a much better job of managing their own lives.  Going on as we are is not a realistic option.  It is the option chosen by the Obama administration, however.  Well, not really, since the Obama administration thought it would be better to make the situation much worse yet and has given us ObamaCare as one of many ways to make it worse.  The young Americans who still like Obama and his socialist programs need to consider very carefully whether they really want the future implied here of incredibly burdensome taxes.  It is time for you young people to focus on trying to live rewarding personal lives in the real world.  But, if you want to continue with your fervor for socialist programs, you need to do a few things:

• Work incredibly hard for the collectivist good and earn a lot of money to be taxed at very high rates.  Never stop working.  It is your duty to the collective good.
• Get used to spending little money, because you will have little left after taxes.  Save all of that money for your old age.  No luxuries, no big homes, no fancy cars, clothes from the thrift shop, and squeeze every penny ten times before spending it.  No, don't spend it.  You cannot afford to.
• Have lots and lots of children to support you in your old age after Medicare and Social Security have gone broke or to keep them hobbling along.  Remember, they are Ponzi schemes and they require lots of young workers to support the older geezers, which you will one day be.  You hope.  If ObamaCare and Medicare do not kill you before what we now think of as our time.  Remember those death panels, they are a-coming, unless retirement and Medicare ages are greatly increased.  As I keep reminding you, Supply and Demand will not be denied.  It is the Grim Reaper of Life.
• Teach your children that they are slaves to your future need as an old geezer.  You must indoctrinate them really, really thoroughly to work like demons and to want nothing from life, but to support you in your old age.

Darn, I missed John Stossel's program again on Fox Business News.  He was going to talk about how the needs of the old require the young to give them their all.  I missed his 8:00 PM show and the re-run at 11:00 PM.  I hope you did not miss his show.

I later realized that an important clarification was needed on the solution of the Social Security funding shortfall with a mere 2% increase in the payroll tax and added the above color-coded caveat on 27 March.

Representative Paul Ryan's Comments on ObamaCare Costs

Representative Paul Ryan is a Libertarian-oriented Republican Congressman of the 1st Congressional District of Wisconsin, which is bordered by Illinois, Lake Michigan, the southern suburbs of Milwaukee, and reaches out to Janesville in the west.  Racine and Kenosha are in his district.  Paul Ryan has read Ayn Rand's works and thinks highly of them.  I have heard him speak a number of times at events which the Atlas Society or the Competitive Enterprise Institute were participating in or sponsoring and he has always been a rational voice.  On 25 February, he spoke up at the Health Care Summit called for by Obama to discuss budgetary issues.  While I believe the primary, and completely sufficient, reason to oppose ObamaCare is the personal mandate and the idea that government has the power to decide what is and what is not acceptable health insurance and health care, the budgetary issues are also important.

Congressman Ryan said:

• Medicare has a $38 trillion unfunded liability already, but half a trillion dollars is to be taken from it, so 20% of present Medicare providers will either go out of business or stop serving people on Medicare.
• The cost of Medicaid is growing at a 21% annual rate and is about to bankrupt a number of states.
• The Majority Leader of the Senate claims the Senate bill will reduce the deficit by $131 billion over the next 10 years, which is nonsense.
• The bill collects half a trillion dollars of new taxes for 10 years and cuts Medicare for 10 years, in order to provide revenues for 6 years of ObamaCare spending.
• The first 10 years of ObamaCare will cost $2.3 trillion.
• The Senate bill takes $52 billion from Social Security, which has huge unfunded liabilities already.
• It takes $72 billion from the long-term care insurance program called the CLASS Act.
• The real 10-year cost of ObamaCare will cause a $460 billion deficit, despite the four-year delay in the program and counting taxes in that 4-year period.
• The second 10-year cost of the program is $1.4 trillion.
• For the last 7 years, Congress has not made the kind of 21% doctors payment cuts that are supposed to be part of the savings from Medicare according to the Senate bill.  The savings which will not occur from this cut is $371 billion.
• Far from reducing Medicare's costs as claimed by Obama, the chief actuary at Medicare says medical costs are going up $222 billion.

The Obama camp response to being in deep, deep debt and running deep, deep deficits, is to close your eyes and plow ahead with huge new spending plans.  After all, tomorrow we will all be dead.

The Gross National Debt and Our Gross National Politicians

The Gross National Debt is the sum of the Public Debt and the money the government owes to itself, such as to Medicare and Social Security.  The Public Debt is important in that the government has to find people willing to hold that debt in exchange for interest, but the real government debt is the Gross National Debt.  This is because when the Social Security Fund starts requiring the government to make good on its IOUs to Social Security so that retired people can be paid their benefits, the government will have to come up with that money or default on the Social Security program.  Coming up with the money may mean borrowing it from the public, finding additional tax revenues, or simply devaluing the money by printing it and paying the money back with less valuable dollars.  The devalued dollars will dilute the benefits.

Let us look at the public debt and the gross debt through the year 2008 graphed in terms of the national Gross Domestic Product (GDP):

The y-axis is mislabeled. The plot is as a function of the percentage of the GDP, not the fraction. The reason for looking at it as a percentage of GDP is because as the economy grows, it is better able to support a given level of debt. In 2008, the gross debt (in black) was 1.72 times the public debt (in red). We already owed the Medicare and Social Security Funds a huge debt. As you can see, the ratio of gross debt to public debt has been increasing in recent decades.

In 2001, Bush's first year in office, the Congress was divided with the Democrats in control of the Senate.  The gross debt was 57.4% of GDP.  In 2003, the Republicans came to control both the House and the Senate.  The 2007 budget was the last one enacted by the Republican controlled House and Senate and the gross debt at the end of 2007 was 65.6% of GDP.  The increase in the gross debt from 2001 to 2007 was 8.2% ( an average yearly increase of 1.17%), which Democrats like to blame on the Bush tax cuts.  Actually, government revenues went up by $576.8 billion a year in this time, so, as is so often the case, the reason for our expanding debt was clearly huge spending increases.  In 2007, despite the increased revenue of $576.8 billion, the government increased its gross debt by $499.3 billion.  That debt was caused by an increase of government expenditures since 2001 of $1.076 trillion!  Many of us Republicans were furious with our party and became very unenthusiastic supporters and that only because we recognized the Democrats as even worse.  The gross debt was, however, not quite as bad as it had been for a couple of years in the 1990s.

So, in 2007 the Democrats took over the House and the Senate.  Their first real budget was in 2008 and it increased the gross national debt from 65.6% to 70.2% of GDP in one year for an increase of 4.6%!  In 2009, with no worry that Obama would veto anything the Congress passed, they really went to town.  The Gross national debt increased to 86.1% of GDP.  In two years of Democrat control, the total increase in gross debt was 20.5%!  According to the OMB, the 2010 gross national debt is estimated to be 98.1% of GDP, for a three year increase of 32.5%!!!!!  This is an average of 10.83% increase per year under the Democrats, compared to the 1.17% yearly increase I used to think was awful between 2001 and 2007.  Actually, I still do think that was awful, but now it is more than 9 times more awful.  How do you express an order of magnitude more than awful?  Does that make the present regime's growth of the gross national debt awesomely awful?  The deficit this year may well be an underestimate, since it is also based on growth in the economy and in government tax receipts which many think are rosy projections, indeed.

Now, this is where reality falls off a cliff.  Next, we enter a real fantasy world.  In 2011, the new Obama budget submission to Congress hopes (it springs eternal) that the gross national debt will only increase to 101.0% of GDP.  They have some very, very rosy projections on how well the economy will do, despite Obama's heavy new taxes.  His proposed new taxes are expected to bring in $2 trillion more over the next 10 years.  Yes, this madman actually thinks he can lower the boom on the economy with backbreaking taxes and it will thrive and throw increased tribute at the feet of the great leader.  The leader will then be free to choose his friends and party lavishly with them, while most Americans carry some lazy and wrongheaded bureaucrat on their back to the feast.

Well, I have news for you kleptocrats.  It is well proven that increasing the tax rate on capital gains results in so many fewer capital gains transactions that tax revenues will go down, not up.  The expected increase in tax revenues of $105.4 billion from that source will never happen.  If you really wanted more revenues in time, you would decrease the capital gains tax rate.  But, if you want the People to think you are a socialist, redistributionist hero and you are trampling the necks of wealthy Capitalists, this sounds good.  But, Capitalists will change their investment behavior to thwart your evil plans and you will get less.  Way to shoot yourselves in the foot!

Obama plans to make the unemployment insurance surtax permanent.  Great, so employers will hire fewer people since that will raise the cost of labor, as will the preferential treatment for labor union goons.  He will increase taxes on oil and gas.  Great, that will result in less oil and gas on the American market and higher prices.  The economy will slow down everywhere.  An increase in oil prices is what started the recession in the first place, even before the collapse of the sub-prime mortgage market.

He will increase taxes on companies with operations abroad.  These companies already share the world's highest corporation taxes with Japan.  This is one of the reasons they have been increasing their operations aboard so much.  This is not rocket science.  If you want corporations to hire more people and produce more in the U.S., lower the corporation tax rate.  No, if you are wrongheaded socialist, you find a way to increase their taxes even more.  The proper response is for these companies to reduce their American operations even more and move their headquarters abroad to countries with lower tax rates.  This will happen in time, if these new taxes are not repealed and if the super-high corporation income tax is not lowered.  Then there is the brilliant idea of putting a special tax on banks.  Now how is that going to result in banks loaning more money to companies as they try to expand to grow us out of this recession?  How much of this tax is going to be passed on to every customer of a bank?  All, or almost all, of it!

Brilliant, Obama, just brilliant.  You claim you could not find a credible economist who would back any other policy when you spoke to the Republican Congressmen.  I will suggest two really good economists you might talk to:  Dr. Thomas Sowell and Prof. Walter E. Williams.  I could list numerous others as well, but I thought I would stick with two who would have been much better guardians of the Constitution and the economy than you are and who would have provided the American People a genuine pleasure in having a black American President.  It really is unfortunate that our first one had to be such an incompetent fool.

Proposed Republican Policy List for RNC Supported Candidates

It has been proposed that any candidate to be supported for election in 2010 by the Republican National Committee must support at least 8 of the following 10 policies:

(1) We support smaller government, smaller national debt, lower deficits and lower taxes by opposing bills like Obama’s “stimulus” bill;
(2) We support market-based health care reform and oppose Obama-style government run health care;
(3) We support market-based energy reforms by opposing cap and trade legislation;
(4) We support workers’ right to secret ballot by opposing card check;
(5) We support legal immigration and assimilation into American society by opposing amnesty for illegal immigrants;
(6) We support victory in Iraq and Afghanistan by supporting military-recommended troop surges;
(7) We support containment of Iran and North Korea, particularly effective action to eliminate their nuclear weapons threat;
(8) We support retention of the Defense of Marriage Act;
(9) We support protecting the lives of vulnerable persons by opposing health care rationing and denial of health care and government funding of abortion; and
(10) We support the right to keep and bear arms by opposing government restrictions on gun ownership.

 I am going to comment on those of these that I disagree with or have some reservations about.  Here goes:

5)  I do support legal immigration and I wish to make it much easier for those who wish to immigrate with larger quotas and lower fees.  I do believe that immigrants should be encouraged to learn English and citizens should be required to know English.  I favor guest worker status which is relatively easy to obtain, so large numbers of those who are now illegal will have future options which are legal.  Those who are now illegal, but have otherwise not been convicted of any crime, who can obtain the recommendations of past employers, who are willing to pay a reasonable fee to alter their status to a legal guest worker status, and who then work 5 years as a guest worker with a continued clean record and further employer recommendations, should be able to obtain legal resident status.  These terms are simply approximations to what I think is a reasonable policy which will benefit the United States and I am open to further discussions on this complex issue.  My views may not be considered consistent with the intent of the resolution enforcers, however.

8)  I flat out reject the Defense of Marriage Act as an infringement of the right of individuals to live in accordance with their own chosen values and their own conscience.  I reject it also because marriage is a spiritual state of union between people and government has no proper role in such a spiritual matter.  Spiritual matters are the realm of individuals, who may chose to make their spiritual values those of a religion or give them a different basis.  What government does have a legitimate role in is domestic partnerships or civil unions by means of enforcing a contract between the parties.  These contracts should no more limit the persons by number or gender than do small business partnerships.  The legal contracts should have multiple standard terms for the care and responsibility for children, for the sharing of property, and for the sharing of medical expenses and decision-making.  The sexual orientation of the partners should be of no concern to the government.  Those of a religious conviction are free to be guided by their convictions in their domestic partnership and are free to have it blessed as a marriage by their religious authorities, but such status will have no legal bearing at all.  Government for its part will refrain from attempting to make any definition of marriage and will leave that to the religions and to the sovereign People.

9)  If the denial of health care is done by government edict, I agree with this statement.  However, I do not agree with it in the context that medical providers are to be forced to provide medical care, if that is the intent of this ambiguously worded statement.  While I support a woman's right to an abortion if she chooses one, it is also clear that taxpayers, many of whom disagree with this, have the right not to play a role in paying for abortions.  They have the right to their convictions and any attempt to make them complicit in an abortion is morally wrong.  Furthermore, partial birth abortions are too marginal to birth to be allowed by law.  They should clearly be illegal.  Once a child is no longer a part of a woman's body, it has the rights of any individual not to be murdered.  I am therefore in agreement with this statement with respect to abortions.

These 10 required positions are simply a proposal at this point.  It will be interesting to watch what happens to this proposal and whether any of my concerns will be addressed.

Medicare and the Public Option

Robert Romano, the Americans for Limited Government Senior Editor, has written a good article on Medicare and the Public Option and on taxes and health care rationing.  It is called Washington's Degenerate Elite.  It tells a story of complete fiscal irresponsibility and of upcoming drastic health care rationing necessitated by biting off more than the government can chew on top of already legislated massive revenue shortfalls.  Even so, Romano does not make a critical part of the problem clear because he allows the government to get away with one of its most irresponsible ruses.  Let's follow his argument and his tale of the numbers and I will point out where the situation gets still more awful and to use his term, still more degenerate.

The Medicare Board of Trustees says Medicare has $2.5 trillion of assets in 2009.  Under a worst case scenario, its assets reach a maximum in 2012 of $2.712 trillion.  The program starts operating at a deficit thereafter.  In 2019, assets will be down to $2.279 trillion after accumulated losses of $433 billion.  Every year after 2012, losses will average about $169 billion per year.  In 2028, Medicare assets will be zero.

Now this is bad, but it is actually much worse than this.  What are these assets?  Well, they are just IOUs written to the program by the government.  To make these IOUs good, the government has to increase taxes or greatly decrease its expenditures elsewhere.  Obama and the Democrat Congress have no intention of generally decreasing spending by enough elsewhere, so taxes will have to go up greatly.  The above paragraph makes it seem as though the increased taxes to continue to fund Medicare must go up when the Medicare assets are gone in 2028.  This is not at all the case.  They will have to go up in 2013 and thereafter in order to cover the average shortfall in Medicare taxes of $169 billion per year!  This is the same year that ObamaCare is supposed to start.  So, the degenerates Obama, Pelosi, and Reid plan to add a new huge spending program the same year that the Medicare program starts operating at a loss.  Brilliant!!!!  These wily, sly socialists are counting on few of the People recognizing this in 2009, which is another of many reasons why they wish to pass this legislation through the Senate this year.

Romano continues with the story.  The Public Option of Obama, Pelosi, and Reid will initially cover about 36 to 45 million people.  The number of covered people is expected to increase with time.  According to the Center for Medicare & Medicaid Services, the cost of the Public Option will be an additional $935 billion by 2019.  How do our degenerate socialists plan to pay for this?  Well, they plan to ration care under Medicare to the extent that they will reduce its costs by $427 billion by 2019.  Note that with no changes of law, we were going to have a deficit of $433 billion by 2019 in Medicare, so these cuts in Medicare, if made, would leave a net deficit of $6 billion in Medicare without the Public Option added expense.  With the Public Option added expense, new taxes are required and Obama and his socialist cadres propose new taxes of $574 billion to be collected by 2019.  This leaves a combined Public Option and Medicare deficit of $367 billion in 2019.  Actually, the deficit will be greater since tax increases do not bring in as much revenue as projected and government plans to cut expenses never reach their goals.

The situation gets worse with time.  The Public Option is initially funded by taxes that go up before the program starts, but which will actually be used to pay the government deficits already in place (Stimulus Bill and other expensive programs).  Consequently, when the Public Option starts spending money, it will also have to convert IOUs into spendable money, which in practice means that either the deficits will be larger at an earlier time than projected or taxes will have to go up still more.  But in the government's ruse, IOUs are gold in the bank and the Public Option debt is only $32 billion in 2017, $59 billion in 2018, and $108 billion in 2019.  By 2030, the deficit from this one program would be more than $1 trillion.  This is based on a number of people covered which many reviewers think is lower than will actually be the case.

The combined costs of Medicare, Medicaid, and the Public Option will soon be greater than $1 trillion per year.  The costs will be increasing every year, which will require severe cuts in health care coupled with severe increases in taxes.  The rich will not be able to bear the cost of these taxes, so Obama's pledge to not raise taxes on the middle class will be meaningless, though that has already become very clear in other contexts.

All of the projections on expenses above were made on older June estimates and on very favorable assumptions.  The Center for Medicare & Medicaid Services now says those June estimates are much too low.  The cost of health care will increase fast enough that the deficit in the Pelosi House Public Option plan will be $289 billion greater than the numbers discussed above by 2019.  How much greater will they be in the outlying years?  Based on past government health care programs, one has to assume they will be many times higher than the costs now projected.

As Romano points out, things get still worse.  PriceWaterhouseCooper says the cost of private insurance will be driven upward sharply by ObamaCare.  An insurance plan that now costs $4,700 will cost $9,917 by 2019 or 2.1 times more than now.  The cost increases for the young will be even larger factors.  Many individuals who are now privately insured will be driven onto the Public Option, raising its costs many times.  When the Public Option is the last resort, it will also be bankrupt!

This Public Option plan simply makes the already intractable problems with Medicare, Medicaid, and Social Security much worse.  It is utter insanity to add to this existing problem with the Public Option.

Of course, as I have said repeatedly, Obama made his insanity very clear when he long ago said that he intended to bankrupt the coal-fired electric power plants which produce half of American electricity.  Apparently, being merely insane is no reason for the American people not to pick a man to be President.  In fact, it almost seems that they thought it was a requirement of the job.  This man is so wrongheaded on so many things that it is not possible to believe that he perceives reality at all.  And he has much company in Pelosi, Reid, Dodd, Waxman, Markey, Baucus (perhaps slightly less insane than the others), Franks, Hoyer, and many others in the Democrat Congress leadership.  All of them are bonkers.  All of them are Looney Tunes.

Obama Administration Finally Reports October Unemployment

Not since the aftermath of Jimmy Carter's rampant inflation, which followed Nixon's price controls fiasco, have we seen such unemployment as that engineered by Obama and the Democrat Congress.  Yes, there was a major increase in unemployment under Bush and the Democrat Congress with considerable help from the Federal Reserve, but we would be recovering from that were it not for the remarkable ability of Obama and an energized socialist Democrat leadership in the House and Senate with their large majorities to create a horrible business climate.

Obama and henchmen would have us believe that our biggest problems are health care and man-made global warming.  And maybe that we have too few workers paying union dues and far too many workers in the private sector rather than the public sector.  Meanwhile, the private sector still employs most Americans, but it is employing fewer and fewer of them.  The official, but understated, unemployment rate at the end of October was an astounding 10.2%!  No wonder any hint of such a large increase was suppressed by the administration prior to the election on Tuesday.  This is the U.S.'s highest unemployment rate since April 1983, 26 years ago.  We have had job losses for 22 straight months.

Obama is conducting a string orchestra in a mad fiddling contest with the devil, the likes of which we have never heard or seen.  Nancy Pelosi is first fiddle and Harry Reid is second fiddle of the Congressional section, which is filled out with the fascist socialists of the Congress.  On the other side of the string orchestra are the Marxist and Maoist Commissars and Czars of his administration section.  They are all fiddling madly to celebrate and encourage the burning of the American private sector and that fable of a Constitution decreeing limited powers for government and that silly notion that individuals have sovereign rights.  They are laughing gleefully as they play the devil's tune.

Since December 2007, the U.S. has lost 7.3 million jobs, but we will all be delighted to know that Obama says he saved 640,000 jobs with the stimulus bill earlier this year.  Let's see, then $787 billion of stimulus created 640,000 jobs at $1.23 million per job.  It is good for people to have a work ethic and to want to work, but it sure is rich to charge taxpayers $1.23 million per job!  Or am I being unfair here?  After all, only about a quarter of the Stimulus Bill appropriations have been spent.  But, then why should we give the government any credit at all for taxpayer money spent just in time to buy as many votes as possible just before the 2010 elections?  Even in terms of the money spent, these would be very expensive jobs, at about $307,500 apiece.  The private sector would usually produce at least 6 or 7 new jobs with so much capital to invest and spend.  But Obama and the Marxists know so little about business and economics that they do not have enough sense not to shout about their "great job creation accomplishment."

So, we now have 15.7 million would-be workers unemployed.  Many of them have been unemployed for more than six months, a record 35.6% of them.  Before the recession, 63% of adults worked, but now only 58.5% work.  The Democrats have championed the little guy, those without a high school diploma, into 15.5% unemployment.  Unemployment for those with the high school diploma is a mere 11.2%.  15.7% of blacks are unemployed and 13.1% of Hispanics are also.  This is very effective support for these Democrat-favored minorities by the Democrats.  Somehow, being anti-business and anti-wealthy people, is not creating the jobs their supposed constituents need.  One should be arguing that being anti-business and anti-wealthy people is the equivalent of being anti-black and anti-Hispanic.  The private sector lost about 558,000 jobs, but the public sector lost no jobs.  The public sector and its employees is now being supported by many fewer people with private sector jobs and we should add the public sector to the enemies of blacks and Hispanics.

Those who have given up on finding jobs and those working part-time who wish to work or work more are now 17.5% of the available workforce.  The total hours worked fell another 0.2% in October and the average workweek is now a mere 33 hours. But, average hourly wages are up 2.4% in the last year, perhaps because job losses have been higher among the more poorly paid, who are usually the least productive workers and the first to be let go in hard times.  These workers are also the more likely to be intimidated or persuaded to join a labor union, which would further hurt a company's productivity.  Thus, it makes still more sense to let such workers go when unions are being favored by government.

There was some good news.  Productivity went up per employed worker at a 9.5% annual rate.  Unemployment decreased from 4.9% to 4.7% for those with college degrees.  Managers and professionals were being hired, so their unemployment rate fell from 5.2% to 4.7%.  The technology, education, and health care sectors were hiring.  Temporary workers were also hired.  But the situation was woeful still for construction, manufacturing, and service and retail.

Apparently, increasing taxes, deficits, government spending, regulations that serve no purpose, restricting international trade, taking over industries, dictating executive compensation, crippling oil and gas exploration and development, threatening the coal industry with extinction, and restricting fossil fuel energy use is not the way to produce jobs.  In fact, it is a very good way to kill jobs.  This is the Marxist, Maoist, fascist way.  The European socialist countries have had 10% unemployment rates very frequently.  Obama has imported these unemployment rates to the U.S.  The strange thing is, the Europeans have been turning away from some of their failed policies, even as Obama turns us toward them.  He is talking about increasing corporate tax rates and those on wealthier individuals, even as most European countries have been reducing those rates in recent years.  We and the Japanese now have the highest corporate tax rates in the advanced world.  It is hurting both of us badly.  But, lowering corporate tax rates just does not fit the Marxist rhetoric or the populist demagogue's style.

The Magnificently Efficient U.S. Postal Service

One of the relatively few things the federal government does that is actually constitutional, is the operation of the U.S. Postal Service.  One can question whether this function ever should have been a government function, but it was made so by our Constitution.  Now one would think that the government would take its actual constitutional duties more seriously than its unconstitutional actions.  The reverse often seems to be true, though there is also a problem in that Congress' taking something seriously only means that the politics involved is taken seriously, not the actual delivery of any real service.  The Postal Service has come under renewed evaluation as an indicator of how a government-run health care system will evolve, not that we do not have many more direct indicators of that!

John Potter, the Postmaster General, says the U.S. Postal Service is in acute financial crisis.  He has been the Postmaster General for the last 8 years.  In FY 2009, the Postal Service lost $7 billion.  Its mail volume decreased by 28 billion pieces compared to the year before.  The recession economy has reduced its business, as well as the Internet and e-mail.  Its Christmas mail has been way down.  In response, Potter cut $6 billion of expenses and 40,000 employees.  Despite this, Potter expects the Postal Service to lose $5 billion every year for many years.

Potter bragged that the fleet of 219,000 vehicles included 44,000 alternative-fuel-capable vehicles.  I'll bet they cost a pretty penny to buy.  Most people do not buy these vehicles because it is difficult to rationalize on an economic basis.  But if you are a government-run business, where politics is everything, you have to back the government story, however fictional, that man-made CO2 emissions are a catastrophic threat to the planet.

This U.S. Postal Service always had plenty of positions considered to be ripe political plums.  Local postmasters were often chosen by politicians.  Nowadays, that still happens, but also political correctness, rather than on-the-job skills, dictates who gets many of these positions.  White males need not apply in many cases.  Having a relative in the Postal Service, I have heard many a story that would make any real businessman's blood boil.

U.S. Postal Service facilities were also long considered great pork.  No doubt, many a facility is badly located and sized as a result.  Politics still limits the closing of many of these facilities.

It is interesting to observe that the U.S. Postal Service tried competing with Federal Express and UPS on next-day deliveries and found that it could not.  It contracted its next-day service to Fed Ex in the end.  Of course, it charges more than Fed Ex does.

Shades of government rationing of health care services, the U.S. Postal Service is now thinking it will have to cut services.  It wants to cut Saturday deliveries, which it says will save it $3 billion a year.  It also wants to offer new products, as the postal services of Japan and France do.  In other words, it wants to compete more with the private sector, which should be considered unconstitutional.  Evidence would suggest it cannot compete successfully.  But, those long lines waiting for counter service are a tempting market.  They could offer them sodas, coffee, candy and other survival goods to enable their captive customers a chance to survive the long waits.

Will our government-run health service do the same?  Imagine severely ill old folks lined up around the block waiting to see the few tired and bored doctors taking a break for sanity from their mountains of paperwork.  Think of all the unskilled new jobs for union members peddling water, sodas, hot dogs, aspirin, renting wheelchairs, and stealing their money!  Think of all the additional money their SEIU union will be able to give the Democrats to further transform America into a socialist peoples state, which is a misnomer for a socialist leaders state.

Government Health Care Insurance Cost Fraud

The Democrats and Max Baucus have pulled the wool over the American people's eyes big time.  Headlines everywhere said the CBO scored the "conceptual plan" of the Baucus Senate Finance Committee "bill" as costing $829 billion and yielding a reduction in the federal deficit of $81 billion.  In these fraudulent numbers they counted only a part of the costs known to be in the "conceptual bill", pretended cost savings for Medicare and Medicaid would occur, which will not occur, and counted tax revenues for 10 years, but cost outlays for only 7 years.  They also ignored the costs being dumped on the American people and the states entirely.

Ex-CBO director Donald Marron believes the Baucus "bill's" uncounted health care new federal spending costs bring the total federal government costs to $904 billion.  New mandates on state spending put $33 billion of additional costs on state governments.  Worst of all, the PriceWaterhouseCoopers study projects the insurance costs we private individuals are going to have to pay will go up by an additional $4000 per family by 2019 and single person coverage will be up by an additional $1500 by then compared to the situation without this bill.  The Massachusetts Taxpayers Foundation has provided a rule of thumb from the Massachusetts health insurance mandate experience: the private sector will pay for 60% of the total costs, while the government books will carry only 40% of the cost, to be passed on to the taxpayer.  So, the private sector will pay 1.5 times as much as the public sector.  Thus, the real cost of the Baucus plan, the lowest cost plan of the many in Congress, is (1.5) ($829 + 33) + $904  = $2,197 billion or $2.197 trillion.

Since 2003 Congress is supposed to have made cuts in Medicare payments to physicians according to law, but every year Congress has refused to allow the cuts, probably because they are very aware that physicians are already underpaid under Medicare.  Such payment reductions are counted on to save $234 billion in the next 10 years according to the Baucus "conceptual plan" and they are very unlikely to happen.  Removing these "savings" leaves one with a government spending increase of $153 billion.  The projected tax increase revenue is also going down from the earlier projections, because Congress is reducing the tax penalty for people who do not have qualified mandated health insurance plans.  Major individual penalties are apparently unpopular!

There are still other reasons that the government costs of this plan are likely to be badly underestimated.  For one thing, taxpayers are supposed to subsidize the costs of those making less than 400% of the poverty level income.  This means 91.5 million people under the age of 65 are eligible for such subsidies.  The CBO estimated that only 29 million of these 91.5 million will become subsidized health insurance plan holders.  The actual number may prove to be much higher, by some estimates, 45 million is a more likely number.

The PriceWaterhouseCoopers study of the costs due to the Baucus "conceptual plan" believes that it will cause health insurance costs to go up an additional 18%.  But, be aware that the costs are very dependent upon which part of the insurance market someone is in.  Those who work for a large employer will see their costs go up by an additional 11%.  Self-insured employers costs will go up by only 9%.  These are the lucky ones.  If you work for a small employer with fewer than 50 employees, the health insurance costs will go up by 28%!  On the other hand, those poor souls in the individual market (non-group) will see costs go up a whopping 49%.  If your employer opts to pay the penalty and to drop out or not offer insurance coverage, those individuals left on their own will see these huge 49% increases.  Of course some will qualify for the government subsidy to offset a portion of that cost increase.

It is always easier to bring on change that destroys than it is to change things for the better.  If you are an empty suit, albeit a well-tailored empty suit, you can promise change and transformation for America easily enough.  If you are a Marxist, the direction your change and transformation will take will prove dramatic for Americans and carry with it mass destruction on a scale most Americans cannot conceive of.  Americans voted for this change, which was hiding in plain sight behind an empty suit and fine, reassuring rhetoric to those who did not think about the meaning of what they were hearing.  In a democracy, even in America given our choice to ignore our Constitution and the sole individual-rights-protection reason for government, the sins of the majority are jackboot visited upon all without discrimination.

Obama's cut in the average family's insurance premium

When Obama was running for the presidency and in the last presidential debate, he said

we estimate we can cut the average family's premium by about $2,500 per year.

He also promised "a net federal spending cut", but added $1.4 trillion to the federal deficit in his first 8 months in office, notes Mark Tapscott in a Washington Examiner editorial. So what is he actually producing on health care based on the Baucus Senate Finance Committee "conceptual outline"?  On this we must bear in mind that because it is only a "conceptual outline" the true costs and "benefits" are simply guesswork.  Add this to the CBO's very long history of huge underestimates.  We must also be wary of the fact that this "conceptual outline" will be melded with the other Senate bill and with the 3 House bills to produce something that will more likely than not be more expensive and more intrusive.

The Baucus conceptual plan does this or more likely more than this:

• Increases government spending by $829 billion
• Adds another 13 million people to Medicaid and children's programs
• Gives subsidies to 23 million more to buy mandated health insurance in insurance exchanges
  
• $426 billion in Medicare and Medicare Advantage benefit cuts
• $201 billion in new taxes on health insurance companies with very comprehensive health insurance plans
• $180 billion in new taxes on medical devices and drugs
• $83 billion in higher income taxes
• $25 billion in new taxes on employers
• $4 billion in fines for those who do not purchase health insurance, or will not validate it to the IRS (me)

Of course the politician's will to make the Medicare cuts will wilt after this law is passed, so much of that will not likely happen.  157 House Democrats sent Nancy Pelosi  a letter objecting to the tax on the very comprehensive health insurance plans, which many union members have, so that may not happen also.  Pelosi is now talking about the business accounting nightmare of implementing a European value added tax (VAT) instead.

But one thing is sure:  the massive government spending increases of this bill will have to be paid for or the deficit will increase greatly.  Usually, the Democrats favor letting the deficit grow, thus creating a huge sinkhole under the country in the end.  Another sure thing is that all of the taxes on business get passed on to the people in higher purchasing prices for goods and services in the end!  Though Obama promised to bring down health care costs, note also that some of the taxes are explicitly on health care goods and services and will drive those costs up very effectively.

So, in addition to the higher taxes and higher costs of many goods and services, what will be the effect on the cost of our health insurance premiums?  A study of that issue by PricewaterhouseCoopers has found this:

• The cost of coverage for the average family now is $12,300, without Baucus it will be $18,400 in 2016, but with Baucus it will cost $2900 more yet in 2016!
• The cost for an individual is now $4,600, the cost in 2016 without Baucus is $6,900, but with Baucus it will be $1,000 higher yet.

So, instead of reducing the average family's health insurance premium by $2,500 a year, Obama is going to increase it by $2,900 a year for a net difference between promise and delivery of $5,400 per year!  A few families will have this partially offset by a tax subsidy.  Everyone will face the higher prices on goods and services due to the added taxes, however.  And probably everyone will have to cope with the inflation or the lower value of the dollar due to the added deficits we will run, despite the pretense to the contrary.

Just in case you are counting, this addition to government net spending breaks another Obama campaign promise.  This huge increase in family health insurance premiums breaks still another campaign promise.  This guy either simply has no control over his promiscuous promises, or he is a very Machiavellian character who thinks we will not remember them for 8 months, or he thinks the People are incredibly stupid.

Gallup: Half of each dollar spent by government is wasted

The Gallup poll of 15 September asked, "Of every tax dollar that goes to Washington, D.C., how many cents of each dollar would you say is wasted?"  The mean response was $0.50.  Amazingly, these same Americans recently voted for Obama!  Yet, when Americans voted for Ronald Reagan in 1980, Americans believed that only $0.40 of every tax dollar was wasted.

The poll also found that 45% of Americans believe there is too much government regulation of business and industry, while only a wild-eyed 24% believe there is too little.

Stephen Moore, in an article in The Wall Street Journal on 23 September, noted that Obama was the first president since Lyndon B. Johnson who did not even pretend to want to cut taxes.  Moore says that there has been a strong voter backlash against Obama and Bush due to the bailouts, stimulus plans, and multi-trillion dollar deficits.  Saving United Auto Worker Union jobs at a cost of $300,000 each and the funding of many old left-wing programs in the Stimulus Bill was too much.  Moore believes the American People are now "in the mood for a radical shrinking of government in order to reduce debt and waste."  Moore suggests:

• A 15% cut in every federal agency, whose budgets have generally increased by more than 50% this last year
• A freeze on federal pay and benefits increases, since federal compensation is nearly twice as high as comparable private sector jobs
• Furloughs for federal workers
  
• Eliminate hundreds of useless federal agencies, such as the Legal Services Corporation
• Use every penny returned by the bailed-out banks to reduce the debt, rather than as a slush fund for new socialist programs

He concludes:

Mr. Obama keeps calling federal spending an "investment," but Americans apparently feel this is the worst investment they've ever made.  They've come to regard Washington as a $2 trillion Bridge to Nowhere.  They are right.

Stephen Moore is apparently trying to be respectful by using the "Mr." before Obama.  I do not feel that respect.  Besides, Obama wants to be a one-word kind of guy, like celebrities such as Sting, Madonna, Prince and the Messiah.

Taxes and Depression

Arthur B. Laffer wrote an excellent opinion piece for The Wall Street Journal on 22 September, which I have been meaning to summarize for some time now. He discusses some of the important causes of the Great Depression. He concentrates on the large tax increases that contributed so much to the depression and I want this as background for several other entries I will be making here. I have previously noted other important causes of the Great Depression, such as the terrible uncertainties the FDR anti-business and anti-capitalism regime caused for businesses with price controls, anti-trust, limits on production, fostering union violence, and regulations. I have also discussed the tax increases, though Laffer's account on taxes is more thorough.

He notes that the policy of the Federal Reserve played a role in the Great Depression, but it was a secondary role. The following tax increases were most important.

• Smoot-Hawley tariff of June 1930, the largest tax increase on trade in peacetime
  
• In 1930-31, slight increase in tax rates on personal income in lowest and highest brackets and the corporate tax rate was increased from 11% to 12%
• In 1932, the personal income tax lowest rate was raised from less than 0.5% to 4% and the highest rate was raised from 25% to 63%, the corporate rate was raised to 13.75%
• Also in 1932, many, many excise taxes were increased, the highest death tax rate was increased from 20% to 45%, and the gift tax was brought back with the highest rate set at 33.5%
• In 1934, the highest death tax was raised from 45% to 60% and the highest gift tax rate was raised from 33.5% to 45%
• In 1935, the highest death tax was raised from 60% to 70% and the highest gift tax rate was raised from 45% to 52.5%
• In 1936, the highest corporate tax rate was increased to 15% and a surtax of up to 27% was placed on undistributed profits; the highest personal income rate was raised from 63% to 79% (a 216% increase in just 4 years)
• In 1937, a 1% employer and a 1% employee tax was instituted on all wages up to $3,000.

State and local taxes were also greatly increased. In 1929, they summed to 7.2% of GDP, but from there they went up each year. In 1930, state and local taxes were 8.5% of GDP, in 1931 they were 9.7%, and in 1932 they were 12.3%. This was a walloping 71% increase in 4 years!

The federal government also forced everyone to sell them their gold at $20.67 an ounce, but then set the price of gold at $35 per ounce in Jaunary 1934 about a year after requiring everyone to turn in their gold. This was a devaluation of the dollar by 59%, which was a huge tax, though in the evilly cunning way of government, it was not called a tax.

Laffer then points out that this 1933-1934 devaluation of the dollar resulted in a 60% increase in the money supply from April 1933 to March 1937. The monetary base grew by more than 35% and adjusted reserves by about 100%. Despite very high unemployment, the consumer price index increased by 15% from early 1933 through mid-1937.

Now in light of this, we must give some thought to the many tax increases Obama has made or is planning to make. Of course many of these tax increases are also not identified as taxes, for Obama is no less cunningly evil than was FDR. We should also think about the many tax increases others will say we must make in order to pay down the huge deficits we already have and those which are coming. The main issue is the growth of the government sector and the stranglehold on the private sector, then and now.

AP Lowers Obama's Tax Pledge Limit

An AP news item on the now projected increased federal deficit for the 2010 to 2019 time period of a $2 trillion increase to $9 trillion tries to open the door for Obama and the Democrats to increase taxes on those making between $200,000 and $250,000 per year now. This article says

Such deficits have always prompted Congress and the White House to take politically painful steps to curb them, such as former President Bill Clinton's tax-heavy 1993 deficit reduction plan. A companion effort by Obama could force him to break his promise to not raise taxes on individuals making less than $200,000 a year.

But..... didn't he actually pledge not to raise taxes on individuals making less than $250,000 a year? Well, yes he did.

This effort to find new revenues should be frustrated by what Obama said was his "firm pledge" not to raise taxes on anyone making less than $250,000.00 a year. "Under my plan," Obama said September 12, 2008 in Dover, N.H., "no family making less than $250,000.00 a year will see any form of tax increase." To emphasize the point he continued, "Not your income taxes, not your payroll tax, not your capital gains taxes, not any of your taxes."

This article also notes that Obama has already raised cigarette taxes, which mostly fall upon people with annual incomes very far below $250,000 a year.

This pledge has not kept Obama and the Democrats from trying to pass legislation which will greatly crank up our energy expenses in a manner which is clearly a subterfuge method of taxation. They are also trying very hard to rearrange health care payments so that for all intents and purposes the young and the healthy are going to be taxed to pay for the higher health care needs of the unhealthy and the older. None of these tax subterfuges respect the no new taxes for those making less than $250,000 a year in the least!

Obama has already made it clear that like Bill Clinton, he believes that lying is a great art form. He does it because he loves the beauty of a well-told lie. Many such lies brought him into the Presidency and gave him the opportunity to try to further his socialist goals in re-making America.