Wednesday, March 30, 2011
Ohio House to vote on collective bargaining limits - Yahoo! News
This is what we need, use the same Cloward and Piven strategy to overwhelm the Lefties in Washington. Every Republican -controlled State should be slamming through collective bargaining, voter ID and immigration legislation as fast as they can so that the left must try to cover a much larger area of battle... Ohio House to vote on collective bargaining limits - Yahoo! News
Sunday, March 27, 2011
Mark Levin Wrong on War Powers | Tom Woods - New York Times Bestselling Author
Tom Woods is a brilliant Constitutional historian, enjoy! Mark Levin Wrong on War Powers Tom Woods - New York Times Bestselling Author
Sunday, March 20, 2011
Obama's Brown Shirts
I remember looking at the protests in Greece and wondering how long before that comes here. Little did I know that it would happen so fast, but here we are. A Governor stands up for freedom and liberty and the Organizer in Chief sends his "troops" into Madison Wisconsin to send a message....
http://biggovernment.com/jjmnolte/2011/03/17/20-days-of-left-wing-thuggery-in-wisconsin-when-will-obama-democrats-and-msm-call-for-civility/
http://biggovernment.com/jjmnolte/2011/03/17/20-days-of-left-wing-thuggery-in-wisconsin-when-will-obama-democrats-and-msm-call-for-civility/
Tuesday, March 15, 2011
Monday, March 14, 2011
Union Money in Politics
An FYI.... Just in case anyone wonders why Pres Obama and his friends are so hot to support labor unions particularly government employee unions, check out Union contributions. Sadly, many members of the Union do not realize that their leadership has been taken over by Socialists who are using the money to elect politicians that are bent on destroying the capitalist system that they now benefit from.
Leading Union Political Campaign Contributors
1990-2010
Democrats
Republicans
American Fed. of State, County, & Municipal Employees
$40,281,900
$547,700
Intel Brotherhood of Electrical Workers
29,705,600
679,000
National Education Association
27,679,300
2,005,200
Service Employees International Union
26,368,470
98,700
Communication Workers of America
26,305,500
125,300
Service Employees International Union
26,252,000
1,086,200
Laborers Union
25,734,000
138,000
American Federation of Teachers
25,682,800
200,000
United Auto Workers
25,082,200
182,700
Teamsters Union
24,926,400
1,822,000
Carpenters and Joiners Union
24,094,100
658,000
Machinists & Aerospace Workers Union
23,875,600
226,300
United Food and Commercial Workers Union
23,182,000
334,200
AFL-CIO
17,124,300
713,500
Sheet Metal Workers Union
16,347,200
342,800
Plumbers & Pipefitters Union
14,790,000
818,500
Operating Engineers Union
13,840,000
2,309,500
Airline Pilots Association
12,806,600
2,398,300
International Association of Firefighters
12,421,700
2,685,400
United Transportation Workers
11,807,000
1,459,300
Ironworkers Union
11,638,900
936,000
American Postal Workers Union
11,633,100
544,300
Nat'l Active & Retired Fed. Employees Association
8,135,400
2,294,600
Seafarers International Union
6,726,800
1,281,300
Source: Center for Responsive Politics, Washington, D.C.
Leading Union Political Campaign Contributors
1990-2010
Democrats
Republicans
American Fed. of State, County, & Municipal Employees
$40,281,900
$547,700
Intel Brotherhood of Electrical Workers
29,705,600
679,000
National Education Association
27,679,300
2,005,200
Service Employees International Union
26,368,470
98,700
Communication Workers of America
26,305,500
125,300
Service Employees International Union
26,252,000
1,086,200
Laborers Union
25,734,000
138,000
American Federation of Teachers
25,682,800
200,000
United Auto Workers
25,082,200
182,700
Teamsters Union
24,926,400
1,822,000
Carpenters and Joiners Union
24,094,100
658,000
Machinists & Aerospace Workers Union
23,875,600
226,300
United Food and Commercial Workers Union
23,182,000
334,200
AFL-CIO
17,124,300
713,500
Sheet Metal Workers Union
16,347,200
342,800
Plumbers & Pipefitters Union
14,790,000
818,500
Operating Engineers Union
13,840,000
2,309,500
Airline Pilots Association
12,806,600
2,398,300
International Association of Firefighters
12,421,700
2,685,400
United Transportation Workers
11,807,000
1,459,300
Ironworkers Union
11,638,900
936,000
American Postal Workers Union
11,633,100
544,300
Nat'l Active & Retired Fed. Employees Association
8,135,400
2,294,600
Seafarers International Union
6,726,800
1,281,300
Source: Center for Responsive Politics, Washington, D.C.
Saturday, March 12, 2011
March of the Damned
For a party whose leader spent a year increasing the size and scope of government because "the status quo is not an option", the Democrats in Wisconsin along with financial support from the President are determined to maintain the status quo in when it comes to keeping the boot of our public employee unions on the throat of the Wisconsin tax payer.
And while we keep hearing about the 300,000 "middle class working families" (average income $75,000 plus benefits) that are getting "screwed", nobody wants to report on the 4.7 million other people in the state (average wage $25,000 - many with no benefits) who have to foot the bill for these poor unfortunate souls.
Politics aside, the math is simple, Wisconsin is broke. We have a projected budget deficit of over $3.0 Billion over the next two years, which comes out to around $6000.00 in additional taxes required per citizen.
If one simply understands that public employees do not pay taxes but only return a portion of the tax-payers money that the government gave to them in the first place, then you might understand why those of us in the private sector are a little tired of the "status quo". If you wish to give your child a chance of a decent education, you have to send them to a private school at a cost of $8000 - $12000 per year on top of the taxes confiscated from you under the threat of having your property taken from you. Imagine if everyone had to send a portion of their money to WalMart even if they wanted to buy the food from Whole Foods.....no one on the Left would stand for it.
Over the last 12 years, Wisconsin has become a tax hell, people and businesses have been leaving the state, just like Michigan. The people in the state have watched the prior administration launder their money through the labor unions and right back into their own campaign funds. In November, they decided that they'd had enough and swept out the corrupt administration and their allies in the state congress.
The idea that we should now recall people who won the election for fulfilling their campaign promises is wishful at best. No one outside of the "ten's of thousands" marching in Madison (many of whom are from Illinois) seems to be upset about the Governor's actions and it is very likely that after all the recall activity, Wisconsin ends up with even more Republican Senators.
Wis. labor protesters say next fight at the polls - Yahoo! News
And while we keep hearing about the 300,000 "middle class working families" (average income $75,000 plus benefits) that are getting "screwed", nobody wants to report on the 4.7 million other people in the state (average wage $25,000 - many with no benefits) who have to foot the bill for these poor unfortunate souls.
Politics aside, the math is simple, Wisconsin is broke. We have a projected budget deficit of over $3.0 Billion over the next two years, which comes out to around $6000.00 in additional taxes required per citizen.
If one simply understands that public employees do not pay taxes but only return a portion of the tax-payers money that the government gave to them in the first place, then you might understand why those of us in the private sector are a little tired of the "status quo". If you wish to give your child a chance of a decent education, you have to send them to a private school at a cost of $8000 - $12000 per year on top of the taxes confiscated from you under the threat of having your property taken from you. Imagine if everyone had to send a portion of their money to WalMart even if they wanted to buy the food from Whole Foods.....no one on the Left would stand for it.
Over the last 12 years, Wisconsin has become a tax hell, people and businesses have been leaving the state, just like Michigan. The people in the state have watched the prior administration launder their money through the labor unions and right back into their own campaign funds. In November, they decided that they'd had enough and swept out the corrupt administration and their allies in the state congress.
The idea that we should now recall people who won the election for fulfilling their campaign promises is wishful at best. No one outside of the "ten's of thousands" marching in Madison (many of whom are from Illinois) seems to be upset about the Governor's actions and it is very likely that after all the recall activity, Wisconsin ends up with even more Republican Senators.
Wis. labor protesters say next fight at the polls - Yahoo! News
Friday, March 11, 2011
How to Stop The End of America
The time has come! The Constitution is dead, the new deal is dead, the great society is dead, the idea that central planning can bring prosperity for all is DEAD. America is waking up to what's been going on in both DC as well as our state and local governments and we've had enough.
Please join the movement to really turn us in a new direction of economic prosperity. Read the essay below for more detail on how to restore America...
From the S&A Digest:
Here I go again… By now, almost everyone reading the Digest knows we set aside Friday's for me (Porter) to write personally. And though I've rejected the idea that people can teach anything (there is no teaching, only learning) – I can't seem to help myself. If you're tired of suffering through these lessons, you'll be happy to know my impulse to empower our subscribers by showing them a few of the more unpleasant truths about finance has cost me a lot of money.
As I knew they would, my essays about the importance of cash and the one last week about asset allocation (when you buy what) resulted in a torrent of refund demands – about $1 million worth in the last two weeks. So if you got something out of those essays, do me a favor: Buy something. Anything. Preferably something expensive.
It is a quirk of human nature that most people don't want to learn anything new and react negatively to anyone who challenges their deeply held views (even when they're obviously wrong). You'll know I'm truly a glutton for punishment when you realize the subject of this week's Friday Digest: Our country's severe financial crisis.
Writing about this topic has led to far greater problems than cancellations. I've gotten threatening letters and angry e-mails from folks who seem to believe that pointing out these dangers is tantamount to causing them.
More than two years ago (December 2008), I first warned in my newsletter that America would eventually lose its world reserve currency status and our debt crisis would lead to a massive inflation. I call this complex series of issues the "End of America." Not because I believe it will lead to the end of our political union (though it might), but because I believe we're heading into a crisis that will be far worse than anyone has yet realized. The crisis will result in a significant decline in our standard of living. These are deadly serious issues and I meant every word I wrote.
Even so, two years ago, lots of folks actually laughed at me – including a few in my own office. Not anymore. If you saw the Wall Street Journal headline yesterday (the "Why the Dollar's Reign is Near an End") or if you saw Sam Zell (the most successful real estate investor of all time) yesterday on CNBC, you know many of the smartest folks in our country take my warning seriously. Said Zell:
My single biggest financial concern is the loss of the dollar as the reserve currency. I can't imagine anything more disastrous to our country… you're already seeing things in the markets that are suggesting that confidence in the dollar is waning… I think you could see a 25% reduction in the standard of living in this country if the U.S. dollar was no longer the world's reserve currency. That's how valuable it is.
So today, I want to update some key figures of my End of America report. I want you to know where we stand. This is important enough to risk the inevitable criticisms (and refunds). But I want to take one criticism out of play right now. Don't bother writing to complain about my "politics."
This has absolutely nothing to do with politics. This matter is purely about economics. The facts, as you'll see, are completely clear to anyone who bothers to learn them. We are spending way beyond our means – both publicly and privately. Worse, this spending has warped the incentives in our economy, resulting in not only debts we can't afford, but outcomes we don't seek. At the heart of this crisis, there's a knowledge problem. Most Americans don't understand even the most basic facts about our country's financial position, nor do they take the time to consider the likely outcome of poorly structured government programs.
So please, don't write to me about politics. I don't care about the Democrats, Republicans, or even the Tea Partiers. I don't care whose "fault" it is, because these debts belong to all of us. I care about the people who live in America… people who are going to be wiped out because of feckless leadership and genuine ignorance. I can't do anything about our leadership – that's up to you. I can try to do something about the ignorance.
In our search for facts and solid financial thinking, let's start with Warren Buffett, who is neither feckless nor stupid. Buffett is the world's best investor. He got that way primarily by figuring out how to correctly value equities and allocate assets… and because he learned one of the most valuable financial secrets in modern finance: why insurance companies are so valuable. (Hint: It's the float. But that's a discussion for another day.)
Buffett has become a sort of "rich uncle" to America, giving helpful advice about financial matters. And he recently said something that struck me as profound – something I'd wager almost everyone else ignored. Buffett explained why the buyers of his mobile homes (Clayton Homes) default at rates (1.86%) much lower than the national average for homebuilders (more than 25%). That's true, even though the buyers of his mobile homes typically have low incomes, less job stability, and lower credit scores than the buyers of conventional housing. If you read nothing else in today's Digest, please pay attention to what Buffett says here:
Our borrowers get in trouble when they lose their jobs, have health problems, get divorced, etc. The recession has hit them hard. But they want to stay in their homes, and generally they borrowed sensible amounts in relation to their income.
In addition, we were keeping the originated mortgages for our own account, which means we were not securitizing or otherwise reselling them. If we were stupid in our lending, we were going to pay the price. That concentrates the mind. If homebuyers throughout the country had behaved like our buyers, America would not have had the crisis that it did. Our approach was simply to get a meaningful down payment and gear fixed monthly payments to a sensible percentage of income. This policy kept Clayton solvent and also kept buyers in their homes…
… A house can be a nightmare if the buyer's eyes are bigger than his wallet and if a lender – often protected by a government guarantee – facilitates his fantasy. Our country's social goal should not be to put families into the house of their dreams, but rather to put them into a house they can afford.
Pretty simple, eh? Don't sell houses to folks who can't afford them. And make sure both the lender (who kept the note) and the borrower (who made a down payment – equity) have plenty of "skin in the game."
You don't want to create any incentive for the deal to go bad. You want both parties to have a powerful incentive to do what they've promised. After ignorance, almost all our country's core problems come back to these same issues: a lack of equity and poorly designed incentives. Remember these concepts. You'll see them again: skin in the game (equity) and properly designed incentives.
Let me take on the toughest problem first: Medicare/Medicaid. Since the government established this program in 1965, it has amassed a $5.6 trillion deficit. This program alone accounts for 40% of our government's total debt. If you could erase these debts, our most recent two foreign wars (Iraq/Afghanistan), and the losses associated with the recent financial crisis, you could eliminate more than half our entire federal debt – a debt threatening to destroy our way of life.
Whether you'd choose to eliminate these debts by eliminating these programs is a political question. I'm not going to discuss politics here. The point I'm trying to make is, regardless of what you'd choose, we have to make a choice. We can't afford to do all of these things.
Like the subprime buyers in the housing bubble, we've bought a government we cannot afford. That's a simple fact. It should be obvious to any thinking person that when government spending makes up 45% of GDP (as it does today) and there's one government employee for every six households, something has gone terribly wrong with America.
When my parents were born, America was still the land of the free. The incentives people faced were different. Before World War II, the federal government made up only 3% of GDP. It didn't provide health care. People had to maintain their health, as best they could. People didn't depend on Ponzi finance (Social Security) for their old age – they had to save. They had to take care of their families and help take care of the unfortunate in their communities.
We didn't spend a lot on the military, either… which gave us an incentive to mind our own business. In fact, back then, our presidents promised to keep us out of foreign wars. Both Wilson and Roosevelt came to power promising to keep us out of the war in Europe. They lied. Almost every other president since has sent our boys to die for others wherever they could. War is good for business… and good for the government.
Lots of people reading this e-mail will say, "I don't want to live in a country like that, where the government doesn't provide a social safety net." Other readers might say, "I don't want America to be 'isolationist.' We need more troops overseas to fight terrorism." OK… So maybe 3% of GDP is not enough for the government we will choose. But 45% of GDP is much too large – again that's not a political choice; we simply cannot afford it.
So how then will we decide? My suggestion: Pay more attention to incentives. And demand much more equity from the voters.
Here are some interesting facts:
In 1965 – when Congress created Medicare/Medicaid and greatly expanded the federal government's role in health care – about 13% of Americans were obese. Today, 32% of Americans are obese.
Before the government enacted Social Security, Americans typically saved between 15% and 20% of their incomes. Today? Almost nothing. In fact, for many years, the savings rate in America was actually negative.
Before the Great Depression, there wasn't any government unemployment insurance. Not surprisingly, there was almost zero long-term unemployment.
One more interesting fact… the U.S. didn't experience a Great Depression until the Federal Reserve was created. The main purpose of the Federal Reserve is to ensure that banks don't fail. Sounds good. But it provides a perverse incentive for banks to act recklessly, which causes bigger booms and busts – just like the one we're experiencing right now.
I'm not arguing government spending is the primary cause of any of these problems. But I am saying you'd have to be a fool to believe incentives don't play a big role in human action. Think about why all politicians try to spend more than they collect in taxes. They have a huge incentive to promise more than they can deliver – and to make up the difference by borrowing against future taxes or printing more money.
The problems created by the perverse incentives of collectivist actions are well known. They are as old as the ideas themselves. They explain why socialism and communism always lead to failure. And yet… we seem eager to pursue these policies in an almost mindless pursuit of bankruptcy. Why? That's not hard to figure out either.
What's the No. 1 reason people make bad decisions? They don't have to suffer the consequences. Which investors made worse decisions during the mortgage bubble? Was it the private hedge-fund managers, whose entire net worth was made up of the assets in their own funds and whose friends and families had invested alongside them? Or was it the senior managers of publicly owned banks, whose creditors were protected by the federal government and who owned little of their own company's equity?
That's easy to answer, even if you knew nothing about the financial crisis. Unless people have a stake in the outcome of an event, they are very likely to choose poorly or recklessly.
The most difficult problem we face today is, far too few Americans have any equity in our government. Less than half of all Americans pay any federal taxes. Don't listen to the nonsense about how almost everyone pays payroll taxes. It's true, but it's irrelevant. Payroll taxes don't come close to covering the costs of the entitlement programs they support.
Cutting government spending will be easy compared to trying to increase the average citizen's equity in government. But we must. People will always demand more from the government until they realize how expensive government solutions really are. And the only way to show them is to share the burdens of government more equally.
Now, I know what you're thinking… I'm making a political argument to reduce the progressive nature of our tax system. I'm not. I'm pointing out a simple fact: When half the voters don't pay for any of the true costs of the government, your society is going to suffer terrible governance.
A democracy that concentrates the overwhelming burden of government on a tiny minority of the population is no different than an investment bank making bad loans and then selling them to someone else. You can't separate the people making the decisions from the costs and the risks of those decisions. And yet, that's what we've done.
We've reached a point where we can longer continue on our current path. America spends 800% more than its nearest rival on its military. We spend 200%-300% more per capita on health care than any other similarly wealthy country. Are we safer? Are we healthier? I honestly don't think so.
And even if you believe we are, can we afford it? Here are the simple numbers. Americans now owe $56 trillion in total debt, much of it held by foreign investors. We must spend $3.5 trillion each year on interest. That is already more than the federal government spends, in total. I do not exaggerate when I tell you we cannot afford these debts. We will never be able to repay these debts – already equal to roughly four times our country's GDP. The largest components of the debts we owe are government debts… and they are growing rapidly and show no signs of stopping.
The only way to stop the debt crisis we face is to reduce the total level of government spending – immediately and permanently. We have to stop giving our citizens improper incentives. We have to increase the "skin" voters have in the game by spreading the burden of government more equally. And most important, we must take away the politicians' ability to debase our currency.
You see… politicians believe, as Dick Cheney famously said, deficits don't matter. They believe these debts can be safely printed away – which is what the Federal Reserve is doing right now.
How can we accomplish these goals? I believe we need three simple amendments to our Constitution. First, we should have a balanced budget amendment. It's hard to imagine why anyone would object to this, regardless of his politics. Politicians ought not have the right to burden future Americans with debt. It's disgusting that we would leave a burden like this for our children and grandchildren.
Next, we need a constitutional amendment that ensures sound money. If you tell the politicians they're not allowed to borrow, they'll inflate instead. There is no reason Americans shouldn't enjoy the stability and safety of sound money.
Every argument you'll hear against backing our currency with gold comes from bankers and swindlers who need the ability to be bailed out so they can make risky bets with enormous amounts of borrowed money. Let's put a stop to this, once and for all.
The American government is the world's largest holder of gold. Let's put it to work for us, right away, in the form of sound money.
Finally… we need a logical way to put a stop to the narrowing of the tax base. Everyone who votes should share in the burdens of government – otherwise the incentive will always exist to vote for more government spending.
I suggest a constitutional amendment limiting tax rates and abolishing all taxes except for income tax. Tax every adult over the age of 65 20% of his income – whatever the source. Give everyone a $24,000 annual personal exemption. Above that, everyone pays. No other deductions. We could get rid of the IRS. You could do your taxes on a post card. How much did you make? Send the government 20% of it.
Why do I think 20% is the right rate? The church has always asked for 10%. Surely the government can survive on twice what God needs. And… we should word the constitutional amendment to make clear our intentions: Every U.S. citizen has the right to keep 80% of his income. Let the feds and the states fight over your tax dollars. Remember, your assets and income are part and parcel of your freedom. A man cannot have his liberty without his property and the right to his wages.
By the way, the U.S. Constitution already decrees all citizens should be equal under the law. Making the tax code truly equal will merely be living up to the obligations our Constitution is already placing on the government. Likewise, the Constitution says Congress shall have the right to coin money. It says nothing about printing or the Federal Reserve.
And finally… the founding fathers of our country once rebelled over a 2% tax on sugar, and they expressly forbid income taxes in their Constitution. Can you imagine what they would think of marginal income tax rates in excess of 50% on people in certain states? These new amendments I'm suggesting aren't really new at all: They're simply a return, a restoration, of the real America – the greatest country in history.
If you like these ideas… please share this Digest. I'm sure it would be difficult to get these amendments passed. But if things in America get as bad as I think they're going to, maybe people would be willing to rethink our government's structure.
Sooner or later we have to learn to live within our means. Sooner or later, a preference for sound money will appear because inflation will have destroyed our currency. And sooner or later, the idea that you can live at the expense of your neighbor (through progressive taxation) will lead to a collapse. My preference would be to learn these lessons sooner, so the pain of this transition can be minimized.
I'm interested in organizing a conference about these ideas… maybe call it The Project to Restore America. I'd host it personally (and invest heavily in this effort). I don't know where yet… but I know when – sometime later this year. My goal will be to get as many well-known people as I can to endorse these ideas and speak about them in public at the conference. I'll try to lure my friends in the media (I have a few) to join with us… plus business leaders… plus regular folks across America.
If we want the government to listen to us… we have to start talking with one, unified and loud voice. I've got a pretty loud microphone here with my publishing company, but I can't do it alone. I need your help. Please pass this Digest around to folks who you think will be willing to read it. And if you want to get involved, please get in touch and tell me how you can help.
If you're interested in these ideas and want to keep up with my efforts, just sign up for a dedicated e-mail list. I'll keep you up to date on what's happening with The Project. And please, get in touch with me if you want to be an active supporter. Again, please pass this e-mail around to folks who you believe would be interested in these ideas and interested in backing The Project to Restore America. Click on the link to have your e-mail address automatically added to the list.
(Just to be clear, I will not sell or rent your name to anyone else. And I will only use this list to promote The Project to Restore America.)
Please join the movement to really turn us in a new direction of economic prosperity. Read the essay below for more detail on how to restore America...
From the S&A Digest:
Here I go again… By now, almost everyone reading the Digest knows we set aside Friday's for me (Porter) to write personally. And though I've rejected the idea that people can teach anything (there is no teaching, only learning) – I can't seem to help myself. If you're tired of suffering through these lessons, you'll be happy to know my impulse to empower our subscribers by showing them a few of the more unpleasant truths about finance has cost me a lot of money.
As I knew they would, my essays about the importance of cash and the one last week about asset allocation (when you buy what) resulted in a torrent of refund demands – about $1 million worth in the last two weeks. So if you got something out of those essays, do me a favor: Buy something. Anything. Preferably something expensive.
It is a quirk of human nature that most people don't want to learn anything new and react negatively to anyone who challenges their deeply held views (even when they're obviously wrong). You'll know I'm truly a glutton for punishment when you realize the subject of this week's Friday Digest: Our country's severe financial crisis.
Writing about this topic has led to far greater problems than cancellations. I've gotten threatening letters and angry e-mails from folks who seem to believe that pointing out these dangers is tantamount to causing them.
More than two years ago (December 2008), I first warned in my newsletter that America would eventually lose its world reserve currency status and our debt crisis would lead to a massive inflation. I call this complex series of issues the "End of America." Not because I believe it will lead to the end of our political union (though it might), but because I believe we're heading into a crisis that will be far worse than anyone has yet realized. The crisis will result in a significant decline in our standard of living. These are deadly serious issues and I meant every word I wrote.
Even so, two years ago, lots of folks actually laughed at me – including a few in my own office. Not anymore. If you saw the Wall Street Journal headline yesterday (the "Why the Dollar's Reign is Near an End") or if you saw Sam Zell (the most successful real estate investor of all time) yesterday on CNBC, you know many of the smartest folks in our country take my warning seriously. Said Zell:
My single biggest financial concern is the loss of the dollar as the reserve currency. I can't imagine anything more disastrous to our country… you're already seeing things in the markets that are suggesting that confidence in the dollar is waning… I think you could see a 25% reduction in the standard of living in this country if the U.S. dollar was no longer the world's reserve currency. That's how valuable it is.
So today, I want to update some key figures of my End of America report. I want you to know where we stand. This is important enough to risk the inevitable criticisms (and refunds). But I want to take one criticism out of play right now. Don't bother writing to complain about my "politics."
This has absolutely nothing to do with politics. This matter is purely about economics. The facts, as you'll see, are completely clear to anyone who bothers to learn them. We are spending way beyond our means – both publicly and privately. Worse, this spending has warped the incentives in our economy, resulting in not only debts we can't afford, but outcomes we don't seek. At the heart of this crisis, there's a knowledge problem. Most Americans don't understand even the most basic facts about our country's financial position, nor do they take the time to consider the likely outcome of poorly structured government programs.
So please, don't write to me about politics. I don't care about the Democrats, Republicans, or even the Tea Partiers. I don't care whose "fault" it is, because these debts belong to all of us. I care about the people who live in America… people who are going to be wiped out because of feckless leadership and genuine ignorance. I can't do anything about our leadership – that's up to you. I can try to do something about the ignorance.
In our search for facts and solid financial thinking, let's start with Warren Buffett, who is neither feckless nor stupid. Buffett is the world's best investor. He got that way primarily by figuring out how to correctly value equities and allocate assets… and because he learned one of the most valuable financial secrets in modern finance: why insurance companies are so valuable. (Hint: It's the float. But that's a discussion for another day.)
Buffett has become a sort of "rich uncle" to America, giving helpful advice about financial matters. And he recently said something that struck me as profound – something I'd wager almost everyone else ignored. Buffett explained why the buyers of his mobile homes (Clayton Homes) default at rates (1.86%) much lower than the national average for homebuilders (more than 25%). That's true, even though the buyers of his mobile homes typically have low incomes, less job stability, and lower credit scores than the buyers of conventional housing. If you read nothing else in today's Digest, please pay attention to what Buffett says here:
Our borrowers get in trouble when they lose their jobs, have health problems, get divorced, etc. The recession has hit them hard. But they want to stay in their homes, and generally they borrowed sensible amounts in relation to their income.
In addition, we were keeping the originated mortgages for our own account, which means we were not securitizing or otherwise reselling them. If we were stupid in our lending, we were going to pay the price. That concentrates the mind. If homebuyers throughout the country had behaved like our buyers, America would not have had the crisis that it did. Our approach was simply to get a meaningful down payment and gear fixed monthly payments to a sensible percentage of income. This policy kept Clayton solvent and also kept buyers in their homes…
… A house can be a nightmare if the buyer's eyes are bigger than his wallet and if a lender – often protected by a government guarantee – facilitates his fantasy. Our country's social goal should not be to put families into the house of their dreams, but rather to put them into a house they can afford.
Pretty simple, eh? Don't sell houses to folks who can't afford them. And make sure both the lender (who kept the note) and the borrower (who made a down payment – equity) have plenty of "skin in the game."
You don't want to create any incentive for the deal to go bad. You want both parties to have a powerful incentive to do what they've promised. After ignorance, almost all our country's core problems come back to these same issues: a lack of equity and poorly designed incentives. Remember these concepts. You'll see them again: skin in the game (equity) and properly designed incentives.
Let me take on the toughest problem first: Medicare/Medicaid. Since the government established this program in 1965, it has amassed a $5.6 trillion deficit. This program alone accounts for 40% of our government's total debt. If you could erase these debts, our most recent two foreign wars (Iraq/Afghanistan), and the losses associated with the recent financial crisis, you could eliminate more than half our entire federal debt – a debt threatening to destroy our way of life.
Whether you'd choose to eliminate these debts by eliminating these programs is a political question. I'm not going to discuss politics here. The point I'm trying to make is, regardless of what you'd choose, we have to make a choice. We can't afford to do all of these things.
Like the subprime buyers in the housing bubble, we've bought a government we cannot afford. That's a simple fact. It should be obvious to any thinking person that when government spending makes up 45% of GDP (as it does today) and there's one government employee for every six households, something has gone terribly wrong with America.
When my parents were born, America was still the land of the free. The incentives people faced were different. Before World War II, the federal government made up only 3% of GDP. It didn't provide health care. People had to maintain their health, as best they could. People didn't depend on Ponzi finance (Social Security) for their old age – they had to save. They had to take care of their families and help take care of the unfortunate in their communities.
We didn't spend a lot on the military, either… which gave us an incentive to mind our own business. In fact, back then, our presidents promised to keep us out of foreign wars. Both Wilson and Roosevelt came to power promising to keep us out of the war in Europe. They lied. Almost every other president since has sent our boys to die for others wherever they could. War is good for business… and good for the government.
Lots of people reading this e-mail will say, "I don't want to live in a country like that, where the government doesn't provide a social safety net." Other readers might say, "I don't want America to be 'isolationist.' We need more troops overseas to fight terrorism." OK… So maybe 3% of GDP is not enough for the government we will choose. But 45% of GDP is much too large – again that's not a political choice; we simply cannot afford it.
So how then will we decide? My suggestion: Pay more attention to incentives. And demand much more equity from the voters.
Here are some interesting facts:
In 1965 – when Congress created Medicare/Medicaid and greatly expanded the federal government's role in health care – about 13% of Americans were obese. Today, 32% of Americans are obese.
Before the government enacted Social Security, Americans typically saved between 15% and 20% of their incomes. Today? Almost nothing. In fact, for many years, the savings rate in America was actually negative.
Before the Great Depression, there wasn't any government unemployment insurance. Not surprisingly, there was almost zero long-term unemployment.
One more interesting fact… the U.S. didn't experience a Great Depression until the Federal Reserve was created. The main purpose of the Federal Reserve is to ensure that banks don't fail. Sounds good. But it provides a perverse incentive for banks to act recklessly, which causes bigger booms and busts – just like the one we're experiencing right now.
I'm not arguing government spending is the primary cause of any of these problems. But I am saying you'd have to be a fool to believe incentives don't play a big role in human action. Think about why all politicians try to spend more than they collect in taxes. They have a huge incentive to promise more than they can deliver – and to make up the difference by borrowing against future taxes or printing more money.
The problems created by the perverse incentives of collectivist actions are well known. They are as old as the ideas themselves. They explain why socialism and communism always lead to failure. And yet… we seem eager to pursue these policies in an almost mindless pursuit of bankruptcy. Why? That's not hard to figure out either.
What's the No. 1 reason people make bad decisions? They don't have to suffer the consequences. Which investors made worse decisions during the mortgage bubble? Was it the private hedge-fund managers, whose entire net worth was made up of the assets in their own funds and whose friends and families had invested alongside them? Or was it the senior managers of publicly owned banks, whose creditors were protected by the federal government and who owned little of their own company's equity?
That's easy to answer, even if you knew nothing about the financial crisis. Unless people have a stake in the outcome of an event, they are very likely to choose poorly or recklessly.
The most difficult problem we face today is, far too few Americans have any equity in our government. Less than half of all Americans pay any federal taxes. Don't listen to the nonsense about how almost everyone pays payroll taxes. It's true, but it's irrelevant. Payroll taxes don't come close to covering the costs of the entitlement programs they support.
Cutting government spending will be easy compared to trying to increase the average citizen's equity in government. But we must. People will always demand more from the government until they realize how expensive government solutions really are. And the only way to show them is to share the burdens of government more equally.
Now, I know what you're thinking… I'm making a political argument to reduce the progressive nature of our tax system. I'm not. I'm pointing out a simple fact: When half the voters don't pay for any of the true costs of the government, your society is going to suffer terrible governance.
A democracy that concentrates the overwhelming burden of government on a tiny minority of the population is no different than an investment bank making bad loans and then selling them to someone else. You can't separate the people making the decisions from the costs and the risks of those decisions. And yet, that's what we've done.
We've reached a point where we can longer continue on our current path. America spends 800% more than its nearest rival on its military. We spend 200%-300% more per capita on health care than any other similarly wealthy country. Are we safer? Are we healthier? I honestly don't think so.
And even if you believe we are, can we afford it? Here are the simple numbers. Americans now owe $56 trillion in total debt, much of it held by foreign investors. We must spend $3.5 trillion each year on interest. That is already more than the federal government spends, in total. I do not exaggerate when I tell you we cannot afford these debts. We will never be able to repay these debts – already equal to roughly four times our country's GDP. The largest components of the debts we owe are government debts… and they are growing rapidly and show no signs of stopping.
The only way to stop the debt crisis we face is to reduce the total level of government spending – immediately and permanently. We have to stop giving our citizens improper incentives. We have to increase the "skin" voters have in the game by spreading the burden of government more equally. And most important, we must take away the politicians' ability to debase our currency.
You see… politicians believe, as Dick Cheney famously said, deficits don't matter. They believe these debts can be safely printed away – which is what the Federal Reserve is doing right now.
How can we accomplish these goals? I believe we need three simple amendments to our Constitution. First, we should have a balanced budget amendment. It's hard to imagine why anyone would object to this, regardless of his politics. Politicians ought not have the right to burden future Americans with debt. It's disgusting that we would leave a burden like this for our children and grandchildren.
Next, we need a constitutional amendment that ensures sound money. If you tell the politicians they're not allowed to borrow, they'll inflate instead. There is no reason Americans shouldn't enjoy the stability and safety of sound money.
Every argument you'll hear against backing our currency with gold comes from bankers and swindlers who need the ability to be bailed out so they can make risky bets with enormous amounts of borrowed money. Let's put a stop to this, once and for all.
The American government is the world's largest holder of gold. Let's put it to work for us, right away, in the form of sound money.
Finally… we need a logical way to put a stop to the narrowing of the tax base. Everyone who votes should share in the burdens of government – otherwise the incentive will always exist to vote for more government spending.
I suggest a constitutional amendment limiting tax rates and abolishing all taxes except for income tax. Tax every adult over the age of 65 20% of his income – whatever the source. Give everyone a $24,000 annual personal exemption. Above that, everyone pays. No other deductions. We could get rid of the IRS. You could do your taxes on a post card. How much did you make? Send the government 20% of it.
Why do I think 20% is the right rate? The church has always asked for 10%. Surely the government can survive on twice what God needs. And… we should word the constitutional amendment to make clear our intentions: Every U.S. citizen has the right to keep 80% of his income. Let the feds and the states fight over your tax dollars. Remember, your assets and income are part and parcel of your freedom. A man cannot have his liberty without his property and the right to his wages.
By the way, the U.S. Constitution already decrees all citizens should be equal under the law. Making the tax code truly equal will merely be living up to the obligations our Constitution is already placing on the government. Likewise, the Constitution says Congress shall have the right to coin money. It says nothing about printing or the Federal Reserve.
And finally… the founding fathers of our country once rebelled over a 2% tax on sugar, and they expressly forbid income taxes in their Constitution. Can you imagine what they would think of marginal income tax rates in excess of 50% on people in certain states? These new amendments I'm suggesting aren't really new at all: They're simply a return, a restoration, of the real America – the greatest country in history.
If you like these ideas… please share this Digest. I'm sure it would be difficult to get these amendments passed. But if things in America get as bad as I think they're going to, maybe people would be willing to rethink our government's structure.
Sooner or later we have to learn to live within our means. Sooner or later, a preference for sound money will appear because inflation will have destroyed our currency. And sooner or later, the idea that you can live at the expense of your neighbor (through progressive taxation) will lead to a collapse. My preference would be to learn these lessons sooner, so the pain of this transition can be minimized.
I'm interested in organizing a conference about these ideas… maybe call it The Project to Restore America. I'd host it personally (and invest heavily in this effort). I don't know where yet… but I know when – sometime later this year. My goal will be to get as many well-known people as I can to endorse these ideas and speak about them in public at the conference. I'll try to lure my friends in the media (I have a few) to join with us… plus business leaders… plus regular folks across America.
If we want the government to listen to us… we have to start talking with one, unified and loud voice. I've got a pretty loud microphone here with my publishing company, but I can't do it alone. I need your help. Please pass this Digest around to folks who you think will be willing to read it. And if you want to get involved, please get in touch and tell me how you can help.
If you're interested in these ideas and want to keep up with my efforts, just sign up for a dedicated e-mail list. I'll keep you up to date on what's happening with The Project. And please, get in touch with me if you want to be an active supporter. Again, please pass this e-mail around to folks who you believe would be interested in these ideas and interested in backing The Project to Restore America. Click on the link to have your e-mail address automatically added to the list.
(Just to be clear, I will not sell or rent your name to anyone else. And I will only use this list to promote The Project to Restore America.)
Wednesday, March 09, 2011
Union Waste: Retiring Wisc. Teachers Given a Year’s Salary for 30 Day’s Work | Right Wing News
If there was any doubt that big labor has been sucking the life out of our economy for years, read this......remember public employees pay no taxes, they only give back a portion of your tax dollars distributed to them in the first place!
Union Waste: Retiring Wisc. Teachers Given a Year’s Salary for 30 Day’s Work Right Wing News
Union Waste: Retiring Wisc. Teachers Given a Year’s Salary for 30 Day’s Work Right Wing News
Sunday, February 27, 2011
The Biggest Myths About Republicans
Nothing new, just another affirmation that nothing has changed.....
The Biggest Myths About Republicans
The Biggest Myths About Republicans
Saturday, February 26, 2011
Detroit - What is and What Should Never Be........
I grew up in Detroit and lived and worked there until 2004. The City today stands as a pure indictment of Central Planning in general and the Euro-Socialist Welfare State in particular. Run by no one but liberal Democrats for over 50 years, the city is and will forever be a grim reminder of what happens when liberty and freedom is traded for the "security" of a government check.....
Frosty Wooldridge (born 1947) is a US journalist, writer, environmentalist, and traveler.
By Frosty Wooldridge
For 15 years, from the mid 1970's to 1990, I worked in Detroit, Michigan. I watched it descend into the abyss of crime, debauchery, gunplay, drugs, school truancy, car jacking, gangs, and human depravity. I watched entire city blocks burned out. I watched graffiti explode on buildings, cars, trucks, buses, and schoolyards. Trash everywhere!
Detroiters walked through it, tossed more into it, and ignored it. Tens of thousands, and then hundreds of thousands today exist on federal welfare, free housing, and food stamps!
With Aid to Dependent Children, minority women birthed eight to 10, and in one case, one woman birthed 24 children as reported by the Detroit Free Press, all on American taxpayer dollars.
A new child meant… a new car payment, a new TV, or whatever mom wanted. I saw Lyndon Baines Johnson's 'Great Society' flourish in Detroit. If you give money for doing nothing, you will get more hands out taking money for doing nothing.
Mayor Coleman Young, perhaps the most corrupt mayor in America, outside of Richard Daley in Chicago, rode Detroit down to its knees... He set the benchmark for cronyism, incompetence, and arrogance. As a black man, he said, "I am the MFIC." The IC meant "in charge".
You can figure out the rest. Detroit became a majority black city with 67 percent African-Americans.
As a United Van Lines truck driver for my summer job from teaching math and science, I loaded hundreds of American families into my van for a new life in another city or state.
Detroit plummeted from 1.8 million citizens to less than 912,000 in 2009 (probably closer to 600,000 in 2010). At the same time, legal and illegal immigrants converged on the city, so much so, that Muslims number over 300,000. Mexicans number 400,000 throughout Michigan, but most work in Detroit. As the whites moved out, the Muslims moved in. As the crimes became more violent, the whites fled. Finally, unlawful Mexicans moved in at a torrid pace. Detroit suffers so much shoplifting that grocery stores no longer operate in many inner city locations. You could cut the racial tension in the air with a knife!
Detroit may be one of our best examples of multiculturalism: pure dislike, and total separation from America.
Today, you hear Muslim calls to worship over the city like a new American Baghdad with hundreds of Islamic mosques in Michigan, paid for by Saudi Arabia oil money. High school flunk out rates reached 76 percent last June, according to NBC's Brian Williams. Classrooms resemble more foreign countries than America. English? Few speak it! The city features a 50 percent illiteracy rate and growing.
Unemployment hit 28.9 percent in 2009 as the auto industry vacated the city. In Time Magazine's October 4, 2009, "The Tragedy of Detroit: How a great city fell, and how it can rise again," I choked on the writer's description of what happened. "If Detroit had been ravaged by a hurricane, and submerged by a ravenous flood, we'd know a lot more about it," said Daniel Okrent. "If drought, and carelessness had spread brush fires across the city, we'd see it on the evening news every night."
Earthquake, tornadoes, you name it, if natural disaster had devastated the city that was once the living proof of American prosperity, the rest of the country might take notice. But Detroit, once our fourth largest city, now 11th, and slipping rapidly, has had no such luck. Its disaster has long been a slow unwinding that seemed to remove it from the rest of the country. Even the death rattle that in the past year emanated from its signature industry brought more attention to the auto executives than to the people of the city, who had for so long been victimized by their dreadful decision making."
As Coleman Young's corruption brought the city to its knees, no amount of federal dollars could save the incredible payoffs, kickbacks, and illegality permeating his administration. I witnessed the city's death from the seat of my 18-wheeler tractor-trailer because I moved people out of every sector of decaying Detroit.
"By any quantifiable standard, the city is on life support. Detroit’s treasury is $300 million short of the funds needed to provide the barest municipal services," Okrent said. "The school system, which six years ago was compelled by the teachers' union to reject a philanthropist's offer of $200 million to build 15 small, independent charter high schools is in receivership. The murder rate is soaring, and 7 out of 10 remain unsolved. Three years after Katrina devastated New Orleans, unemployment in that city hit a peak of 11%. In Detroit, the unemployment rate is 28.9%.
That's worth spelling out: twenty-eight point nine percent." At the end of Okrent's report, and he will write a dozen more about Detroit, he said, "That's because the story of Detroit is not simply one of a great city's collapse, it's also about the erosion of the industries that helped build the country we know today. The ultimate fate of Detroit will reveal much about the character of America in the 21st century. If what was once the most prosperous manufacturing city in the nation has been brought to its knees, what does that say about our recent past? And if it can't find a way to get up, what does that say about our future?"
Sad isn't it?
Frosty Wooldridge (born 1947) is a US journalist, writer, environmentalist, and traveler.
By Frosty Wooldridge
For 15 years, from the mid 1970's to 1990, I worked in Detroit, Michigan. I watched it descend into the abyss of crime, debauchery, gunplay, drugs, school truancy, car jacking, gangs, and human depravity. I watched entire city blocks burned out. I watched graffiti explode on buildings, cars, trucks, buses, and schoolyards. Trash everywhere!
Detroiters walked through it, tossed more into it, and ignored it. Tens of thousands, and then hundreds of thousands today exist on federal welfare, free housing, and food stamps!
With Aid to Dependent Children, minority women birthed eight to 10, and in one case, one woman birthed 24 children as reported by the Detroit Free Press, all on American taxpayer dollars.
A new child meant… a new car payment, a new TV, or whatever mom wanted. I saw Lyndon Baines Johnson's 'Great Society' flourish in Detroit. If you give money for doing nothing, you will get more hands out taking money for doing nothing.
Mayor Coleman Young, perhaps the most corrupt mayor in America, outside of Richard Daley in Chicago, rode Detroit down to its knees... He set the benchmark for cronyism, incompetence, and arrogance. As a black man, he said, "I am the MFIC." The IC meant "in charge".
You can figure out the rest. Detroit became a majority black city with 67 percent African-Americans.
As a United Van Lines truck driver for my summer job from teaching math and science, I loaded hundreds of American families into my van for a new life in another city or state.
Detroit plummeted from 1.8 million citizens to less than 912,000 in 2009 (probably closer to 600,000 in 2010). At the same time, legal and illegal immigrants converged on the city, so much so, that Muslims number over 300,000. Mexicans number 400,000 throughout Michigan, but most work in Detroit. As the whites moved out, the Muslims moved in. As the crimes became more violent, the whites fled. Finally, unlawful Mexicans moved in at a torrid pace. Detroit suffers so much shoplifting that grocery stores no longer operate in many inner city locations. You could cut the racial tension in the air with a knife!
Detroit may be one of our best examples of multiculturalism: pure dislike, and total separation from America.
Today, you hear Muslim calls to worship over the city like a new American Baghdad with hundreds of Islamic mosques in Michigan, paid for by Saudi Arabia oil money. High school flunk out rates reached 76 percent last June, according to NBC's Brian Williams. Classrooms resemble more foreign countries than America. English? Few speak it! The city features a 50 percent illiteracy rate and growing.
Unemployment hit 28.9 percent in 2009 as the auto industry vacated the city. In Time Magazine's October 4, 2009, "The Tragedy of Detroit: How a great city fell, and how it can rise again," I choked on the writer's description of what happened. "If Detroit had been ravaged by a hurricane, and submerged by a ravenous flood, we'd know a lot more about it," said Daniel Okrent. "If drought, and carelessness had spread brush fires across the city, we'd see it on the evening news every night."
Earthquake, tornadoes, you name it, if natural disaster had devastated the city that was once the living proof of American prosperity, the rest of the country might take notice. But Detroit, once our fourth largest city, now 11th, and slipping rapidly, has had no such luck. Its disaster has long been a slow unwinding that seemed to remove it from the rest of the country. Even the death rattle that in the past year emanated from its signature industry brought more attention to the auto executives than to the people of the city, who had for so long been victimized by their dreadful decision making."
As Coleman Young's corruption brought the city to its knees, no amount of federal dollars could save the incredible payoffs, kickbacks, and illegality permeating his administration. I witnessed the city's death from the seat of my 18-wheeler tractor-trailer because I moved people out of every sector of decaying Detroit.
"By any quantifiable standard, the city is on life support. Detroit’s treasury is $300 million short of the funds needed to provide the barest municipal services," Okrent said. "The school system, which six years ago was compelled by the teachers' union to reject a philanthropist's offer of $200 million to build 15 small, independent charter high schools is in receivership. The murder rate is soaring, and 7 out of 10 remain unsolved. Three years after Katrina devastated New Orleans, unemployment in that city hit a peak of 11%. In Detroit, the unemployment rate is 28.9%.
That's worth spelling out: twenty-eight point nine percent." At the end of Okrent's report, and he will write a dozen more about Detroit, he said, "That's because the story of Detroit is not simply one of a great city's collapse, it's also about the erosion of the industries that helped build the country we know today. The ultimate fate of Detroit will reveal much about the character of America in the 21st century. If what was once the most prosperous manufacturing city in the nation has been brought to its knees, what does that say about our recent past? And if it can't find a way to get up, what does that say about our future?"
Sad isn't it?
Sunday, February 20, 2011
Mish's Global Economic Trend Analysis: 40% of Madison Teachers call in Sick, Schools Shut; Video of Massive Protest in Wisconsin Capitol Building; If Jackasses Could Think
My own thoughts on this issue are in line with the following from Mish......
Imagine that the government forced you to buy my products from me at the price that I dictate. Then suppose then that my product was so bad that you had to purchase the same type of product from someone else in addition to the one you buy from me to ensure that your family is getting the quality of that product that you seek.
Well, that's the Wisconsin education system. Through the tax code, we are forced to pay for the public education system which is so bad, that my neighbor who's wife is a teachers advises us to spend an additional $10K per year so that our child can get a great education.....
Does that make sense to anyone?
Mish's Global Economic Trend Analysis: 40% of Madison Teachers call in Sick, Schools Shut; Video of Massive Protest in Wisconsin Capitol Building; If Jackasses Could Think
Imagine that the government forced you to buy my products from me at the price that I dictate. Then suppose then that my product was so bad that you had to purchase the same type of product from someone else in addition to the one you buy from me to ensure that your family is getting the quality of that product that you seek.
Well, that's the Wisconsin education system. Through the tax code, we are forced to pay for the public education system which is so bad, that my neighbor who's wife is a teachers advises us to spend an additional $10K per year so that our child can get a great education.....
Does that make sense to anyone?
Mish's Global Economic Trend Analysis: 40% of Madison Teachers call in Sick, Schools Shut; Video of Massive Protest in Wisconsin Capitol Building; If Jackasses Could Think
Saturday, February 19, 2011
The End of America is Not a Joke
I have been a True Wealth subscriber for over 10 years. Their investment research is very sound and their principles are founded in austrian economic teachings. They predicted the fall of GM, Fannie and Freddie well before the MSM picked it up.
While we don't know what the true impact will be on our lives, the scenes we are seeing in Madison Wi. this week is further evidence of the impending collapse of America as we knew her. Ignore this video at your own risk.
While we don't know what the true impact will be on our lives, the scenes we are seeing in Madison Wi. this week is further evidence of the impending collapse of America as we knew her. Ignore this video at your own risk.
US Government not Enforcing Immigration Laws
Just like the past two years, it is time to give the Obama Administration a taste of their own medicine. The congress should be hauling each and every one of his cabinet in front of the country and hold them accountable for every unconstitutional act whether it be ommission or commision. By keeping the White House on defense and hitting them with something new every day, we will be able to keep the lies and distortions from taking hold. It is time to send a message to this current and all future Presidents that they are in charge of the government, not the Republic.....
Tuesday, January 25, 2011
Dear Mr. Reid
A great piece by Addison Wiggin:
The Honorable Harry Reid
Majority Leader
United States Senate
Washington, DC 20510
Dear Mr. Leader,
I'm writing in response to Treasury Secretary Timothy Geithner's appeal to you to raise the debt ceiling.
I understand that you didn't ask for my opinion. And with no political positions on my curriculum vitae, you may not even recognize my name. But I have co-authored two books warning about the United States' fiscal situation, starting with Financial Reckoning Day in 2003 and followed by Empire of Debt in 2005. I mailed copies of the latter to you and the other members of Congress free of charge. While it may not be sitting on your nightstand, I trust that you’re at least aware of the book.
After we published the book, I wrote and produced a documentary, I.O.U.S.A., which was screened in competition at the Sundance Film Festival, nominated for a Critics Choice award and shortlisted for an Academy Award. The film attempts to present the fiscal crisis facing the United States in a way that the average American could understand. The film took two years to produce and premiered on Aug. 22, 2008 — almost a month before Lehman Bros. declared bankruptcy, kicking off the Panic of '08.
So after a decade of attempting to bring the root causes of our economic woes to light, I humbly suggest that the shortsighted tone of Mr. Geithner's appeal is itself part of the problem. It is, in fact, no different than Secretary of Treasury Hank Paulson’s frantic three-page proposal that kicked off the bailouts in September 2008.
Sir, in short, by raising the debt ceiling, we're delaying the day of reckoning yet again. Instead of paying for our excessive spending today, we'll pass that burden on to our children and grandchildren. I have three young children. And I, like many Americans, already find it a challenge to educate them and provide for their health care. Now I must also worry about what their future is going to look like... what opportunities will they find when it's their turn to join the work force or start businesses?
Mr. Geithner shares his fears of a default in his letter to you. But his request simply means my children — everyone’s children — will have to deal with that default on their own.
Do we really want our children burdened by higher taxes, excessive government regulation, higher mortgage rates, reduced incentives to start their own businesses and, as things are going, the end of the freedoms that you, Mr. Geithner, the rest of the American public and I cherish?
Freedom is the very promise that America bestows on history. But now, through our own malfeasance, we are in a position of telling the world, "We cannot afford to offer you the opportunity to enjoy that freedom anymore."
How did it come to this? And why perpetuate the very malfeasance that threatens our future prosperity?
For most of America, understanding the fiscal condition of the nation is no easy task. For that, they place their trust in you. No doubt, it’s easier to do exactly what our Treasury secretary is asking you to do — ignore the problem and continue to kick the can down the road. But I’m asking you, on behalf of future generations, to think deeper about the problem and begin addressing it today.
To help you with your decision, here are some images you can use to illustrate the magnitude of the national burden.
As Mr. Geithner stated in his letter to you, “In February of 2010, Congress passed legislation to increase the debt limit to $14.29 trillion.” To grasp that staggering figure, imagine stacking $100 bills on top of one another. To reach $14.29 trillion, your stack would soar 9,721 miles into the sky!
Said a different way, that’s like 1,767 mountains of $100 bills the size of Mount Everest piled on top of each other.
Of course, the current debt wouldn’t be a problem if tax revenue were exceeding our spending and therefore reducing the debt. But we both know that is not happening. Even if we taxed all Americans 100% of their income for an entire year, we still wouldn’t be able to pay off our $14.29 trillion hole
What's more, the interest we’re paying on the current debt is forcing us deeper and deeper into the hole. According to the TreasuryDirect.gov website, the interest payment on our debt was a massive $1.13 billion per day — for a total of $413 billion — in 2010.
The interest payment alone amounts to record-breaking deficits hit during the Bush administration just a few short years ago. If you agree to raise the ceiling, you effectively agree to drive up the interest payments until they exceed tax revenue — creating a situation in which we’ll be forced to default, eventually. And the longer it takes to happen, the worse it will be for our children.
The Treasury secretary outlines how catastrophic a default would be for the financial system and the integrity of the United States:
Default would effectively impose a significant and long-lasting tax on all Americans and all American businesses and could lead to the loss of millions of American jobs.
When, I ask you, do we begin addressing the root problem? When do we admit that we're spending beyond our means and begin to address the problem in earnest? "We can live beyond our means for a very long time," to paraphrase a leading financier from I.O.U.S.A., "and we can do it on a very large scale — but we cannot do it forever."
The United States is like a private company suffering from a pension burden it did not plan for and that is losing market share because its products are no longer competitive. And it is as if the management has decided to take an extended vacation, rather than hold a meeting to find a way out of the hole.
In Congress, you don't address the real problems. You talk around them, play politics with them and then make frantic appeals at the 11th hour to borrow more money to paper over the problems again for yet another year.
At this pace, how do you honestly believe the government will ever balance its books again? In the era of uncertainty created by mayhem in Washington and ever-increasing global competition, how do you expect the economy to get back on track?
Let's put the numbers aside for a second. I'd like to ask you a simple question:
Imagine for a moment that you’ve chosen to smoke cigarettes all your life. You’ve ignored the warnings about them that appear all around you. Then, eventually, and unfortunately, you get diagnosed with lung cancer.
Luckily, you’ve caught the disease in its very early stages. The doctor presents you with two choices.
First, you can enter chemotherapy. The road to recovery, the doctor tells you, will be harsh. You’ll suffer extreme nausea. You’ll hardly be able to swallow from the ulcers you develop in your mouth. In short, you’ll go through hell in an attempt to beat the disease. But because you caught the disease after the first symptoms appeared, you have a high chance at a full recovery.
The doctor also offers a second alternative. He’s worked out a deal that allows you to rid yourself of the disease instantly. No pain. No suffering. No hell. All you have to do is agree to give the disease to your 2-year-old grandson.
Would you make that deal, Mr. Leader?
I trust you'll make the right decision about our nation’s fiscal health. At the very least, there needs to be an honest debate over raising the debt ceiling. If you provide the rubber stamp Mr. Geithner is asking for, you will be as guilty as he of passing the buck. Each time the buck gets passed, the stakes get higher. The default Mr. Geithner fears only looms more ominous in our future.
The newly elected speaker of the House, John Boehner, has gone on record saying he'll agree to increase the debt limit because we have to be "adults" about addressing the fiscal crisis the nation faces.
What, may I ask, is "adult" about failing to address this issue altogether?
Sincerely,
Addison Wiggin
Executive publisher, Agora Financial
Co-author, Financial Reckoning Day and Empire of Debt
Executive producer, writer, I.O.U.S.A.
The Honorable Harry Reid
Majority Leader
United States Senate
Washington, DC 20510
Dear Mr. Leader,
I'm writing in response to Treasury Secretary Timothy Geithner's appeal to you to raise the debt ceiling.
I understand that you didn't ask for my opinion. And with no political positions on my curriculum vitae, you may not even recognize my name. But I have co-authored two books warning about the United States' fiscal situation, starting with Financial Reckoning Day in 2003 and followed by Empire of Debt in 2005. I mailed copies of the latter to you and the other members of Congress free of charge. While it may not be sitting on your nightstand, I trust that you’re at least aware of the book.
After we published the book, I wrote and produced a documentary, I.O.U.S.A., which was screened in competition at the Sundance Film Festival, nominated for a Critics Choice award and shortlisted for an Academy Award. The film attempts to present the fiscal crisis facing the United States in a way that the average American could understand. The film took two years to produce and premiered on Aug. 22, 2008 — almost a month before Lehman Bros. declared bankruptcy, kicking off the Panic of '08.
So after a decade of attempting to bring the root causes of our economic woes to light, I humbly suggest that the shortsighted tone of Mr. Geithner's appeal is itself part of the problem. It is, in fact, no different than Secretary of Treasury Hank Paulson’s frantic three-page proposal that kicked off the bailouts in September 2008.
Sir, in short, by raising the debt ceiling, we're delaying the day of reckoning yet again. Instead of paying for our excessive spending today, we'll pass that burden on to our children and grandchildren. I have three young children. And I, like many Americans, already find it a challenge to educate them and provide for their health care. Now I must also worry about what their future is going to look like... what opportunities will they find when it's their turn to join the work force or start businesses?
Mr. Geithner shares his fears of a default in his letter to you. But his request simply means my children — everyone’s children — will have to deal with that default on their own.
Do we really want our children burdened by higher taxes, excessive government regulation, higher mortgage rates, reduced incentives to start their own businesses and, as things are going, the end of the freedoms that you, Mr. Geithner, the rest of the American public and I cherish?
Freedom is the very promise that America bestows on history. But now, through our own malfeasance, we are in a position of telling the world, "We cannot afford to offer you the opportunity to enjoy that freedom anymore."
How did it come to this? And why perpetuate the very malfeasance that threatens our future prosperity?
For most of America, understanding the fiscal condition of the nation is no easy task. For that, they place their trust in you. No doubt, it’s easier to do exactly what our Treasury secretary is asking you to do — ignore the problem and continue to kick the can down the road. But I’m asking you, on behalf of future generations, to think deeper about the problem and begin addressing it today.
To help you with your decision, here are some images you can use to illustrate the magnitude of the national burden.
As Mr. Geithner stated in his letter to you, “In February of 2010, Congress passed legislation to increase the debt limit to $14.29 trillion.” To grasp that staggering figure, imagine stacking $100 bills on top of one another. To reach $14.29 trillion, your stack would soar 9,721 miles into the sky!
Said a different way, that’s like 1,767 mountains of $100 bills the size of Mount Everest piled on top of each other.
Of course, the current debt wouldn’t be a problem if tax revenue were exceeding our spending and therefore reducing the debt. But we both know that is not happening. Even if we taxed all Americans 100% of their income for an entire year, we still wouldn’t be able to pay off our $14.29 trillion hole
What's more, the interest we’re paying on the current debt is forcing us deeper and deeper into the hole. According to the TreasuryDirect.gov website, the interest payment on our debt was a massive $1.13 billion per day — for a total of $413 billion — in 2010.
The interest payment alone amounts to record-breaking deficits hit during the Bush administration just a few short years ago. If you agree to raise the ceiling, you effectively agree to drive up the interest payments until they exceed tax revenue — creating a situation in which we’ll be forced to default, eventually. And the longer it takes to happen, the worse it will be for our children.
The Treasury secretary outlines how catastrophic a default would be for the financial system and the integrity of the United States:
Default would effectively impose a significant and long-lasting tax on all Americans and all American businesses and could lead to the loss of millions of American jobs.
When, I ask you, do we begin addressing the root problem? When do we admit that we're spending beyond our means and begin to address the problem in earnest? "We can live beyond our means for a very long time," to paraphrase a leading financier from I.O.U.S.A., "and we can do it on a very large scale — but we cannot do it forever."
The United States is like a private company suffering from a pension burden it did not plan for and that is losing market share because its products are no longer competitive. And it is as if the management has decided to take an extended vacation, rather than hold a meeting to find a way out of the hole.
In Congress, you don't address the real problems. You talk around them, play politics with them and then make frantic appeals at the 11th hour to borrow more money to paper over the problems again for yet another year.
At this pace, how do you honestly believe the government will ever balance its books again? In the era of uncertainty created by mayhem in Washington and ever-increasing global competition, how do you expect the economy to get back on track?
Let's put the numbers aside for a second. I'd like to ask you a simple question:
Imagine for a moment that you’ve chosen to smoke cigarettes all your life. You’ve ignored the warnings about them that appear all around you. Then, eventually, and unfortunately, you get diagnosed with lung cancer.
Luckily, you’ve caught the disease in its very early stages. The doctor presents you with two choices.
First, you can enter chemotherapy. The road to recovery, the doctor tells you, will be harsh. You’ll suffer extreme nausea. You’ll hardly be able to swallow from the ulcers you develop in your mouth. In short, you’ll go through hell in an attempt to beat the disease. But because you caught the disease after the first symptoms appeared, you have a high chance at a full recovery.
The doctor also offers a second alternative. He’s worked out a deal that allows you to rid yourself of the disease instantly. No pain. No suffering. No hell. All you have to do is agree to give the disease to your 2-year-old grandson.
Would you make that deal, Mr. Leader?
I trust you'll make the right decision about our nation’s fiscal health. At the very least, there needs to be an honest debate over raising the debt ceiling. If you provide the rubber stamp Mr. Geithner is asking for, you will be as guilty as he of passing the buck. Each time the buck gets passed, the stakes get higher. The default Mr. Geithner fears only looms more ominous in our future.
The newly elected speaker of the House, John Boehner, has gone on record saying he'll agree to increase the debt limit because we have to be "adults" about addressing the fiscal crisis the nation faces.
What, may I ask, is "adult" about failing to address this issue altogether?
Sincerely,
Addison Wiggin
Executive publisher, Agora Financial
Co-author, Financial Reckoning Day and Empire of Debt
Executive producer, writer, I.O.U.S.A.
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