How long can we keep this up?

All of us should be absolutely terrified by this graph below.  Why?  Because it so clearly illustrates what kind of crazy mess we are already in, and what horrific magnification of this mess we will see in the next four years if President Obama and the rest of the Keynesian redistributionists get their way.

The most pressing question for Americans in 2013 is: are we a nation of free enterprise or of government intervention?  Case in point - almost 75% of the recovery jobs in the past 2 years are with the government or government funded entities (hint: propped up "green energy" companies don't count as private enterprise). We are looking at record levels of revenues but exponentially higher levels of government spending. Obama and most of the democrats are perfectly happy to continue on with this strategy, thinking that they will be able to tax "the rich" into submission, not really caring that even forcibly taking every cent of income from the rich will barely make a dent in the deficit spending and that we are mortgaging away our children's future to China. Ultimately, Obama would like as many people as possible dependent on the government, because that's what makes his redistribution plan possible, but the balance is tipping and soon private sector people won't be able to support everyone in made up government jobs.

How long can we keep going at this rate before there are not enough people to redistribute from?  If the current course is not changed, at some point we'll reach a point where no productive people will work in this country. It will become either Animal Farm or Atlas Shrugged.

And frankly the Republicans are little better than Democrats when it comes to spending.  Fortunately Tea Party Republicans are forcing the conversation in both houses, and now all Republicans are at least giving lip service to reducing spending.  It remains to be seen if they will actually follow through.  The debt ceiling discussions will be the perfect opportunity for Republicans to demonstrate that they are actually serious about massive cuts to spending and aren't just all talk.  They have already been embarrassingly willing to give in to Obama's "I won the election, so we'll do what I want" posturing.  Let's see if they are able to man up and grow a pair.  If not, then in 2014 it will be the rest of us that will be to blame if we don't elect representatives actually willing to stand up for the future of this country.  In the meanwhile, since all our elected representatives have shown themselves incapable of closing the checkbook (with the notable exception of Newt Gingrich's Contract with America congress under Clinton), American's need to actively lobby for a balanced budget amendment.  

Should we just let the sequestration happen?

Watching the Sunday morning new shows over the weekend, I was stunned to see that while there was much discussion about whether taxes on millionaires, that now includes families making over $250,000 by the way, but none on what spending to cut.  Not one of the members of the House or Senate, or even the pundits for that matter, were calling on the President and Congress to cut spending.  

It seems that all the concern around the Fiscal Cliff negotiations is extended only to taxes, not the out of control spending that is driving the country toward bankruptcy.  All of the participants, regardless of party, spent their time lamenting how this tax rate increase or removing that loophole would increase revenues.  I heard plenty of Republican's willing to dishonor the Norquist pledge saying it doesn't matter in this time of trillion dollar deficits, but I did not hear Democrats pledging to play their part and reduce entitlements. This is the story we've heard from big government for far too long -- no matter how much revenue the Federal Government is able to collect, they will be able to easily spend it all.  Keynesian Democrats have been convinced they can spend their way out of the recession, and see where that's gotten us.  And no matter what lip-service we've heard over the years from Republicans on big spending, both parties are complicit, but we are in WAY over our heads with no end in sight.

1947-2012 Federal Government Tax Revenues vs. Spending

Federal Government Tax Revenues vs. Expenditures

Federal Reserve Bank of St. Louis

October 4, 2012

We need to take a serious look at ALL spending, and right off the bat, begin means testing for Social Security and Medicare.  Is it theft to exclude payments to rich seniors who have paid into the system their whole working lives?  Yes, but it has to be done.  Frankly, social security is a drop in the bucket for wealthy people who can afford their retirement without it, and those same people should not be partaking of government sponsored healthcare.  I know they have paid into it, but they are screwing their grandchildren out of a lot more by expecting to receive it.  The current senior population is not "the Greatest Generation" for nothing; they would do what's right and accept the means testing.  Baby Boomers, on the other hand, are selfish enough to not care what kind of legacy they are leaving and would fight it, but again, it must be done as part of comprehensive cuts in all spending.

And what of the "sequestration" that is no longer generating discussion?  Let it happen. We are currently spending about $3.6T a year and bringing in $2.5T.  Sequestration is an idea that has been around for decades, but his statements in the 2nd presidential debate notwithstanding, was promoted by the Obama administration in order to serve as a "stick" during budget negotiations.  It will enforce an automatic, $1.2T cut to spending to both defense and non-defense spending in order to meet a balanced budget.  

However we do it, the people of this country need to fight for cuts, to force Congress to turn from the path we've been traveling and give back the promise of a strong America for our children, not a bankrupt one.

The Fiscal Cliff

I'm sure many are thinking today that with the election having gone their way, all with be right with the world and President Obama will be free to continue with the policies he promoted during his first term.  The split government, however, will make both the president's and the congreses jobs more difficult, as the last two years have demonstrated.  We live in an age of intense partisanship, where the opposing parties really do have fundamental differences in the way they see the country and the role of government.  Yesterday's election resulted in a second term for Obama and maintained Democratic control of the Senate, but the House remains firmly in control by the Republicans. 

The term "Fiscal Cliff" is used to refer to the set of economic circumstances we currently face as we near the end of 2012 with the Bush-era and 2011 temporary tax cuts set to expire, automatic cuts in entitlement programs agreed to as part of the debt ceiling negotiations ready to take effect, and new taxes kicking in as part of Obamacare.  It is unlikely the President and lame duck Congress will be able to work out a compromise in the next month to stave off the impending hit to business and households in 2013.  In all likelihood more temporary stop-gap measures will be put into place and will just serve to keep the country sluggishly marching in place and the economy as stagnant as it has been the last four years. It is worth noting that the President has yet to get a budget passed by a split congress and the Democratically led Senate has vowed to block Republican proposals that cut taxes or actual spending.  

The other "Fiscal Cliff" we face is the long-term crisis looming as we grow our National Debt to unsustainable levels with ever-increasing budget deficits.  President Obama is seemingly disinterested in or lacking understanding of the implications to the nation's future economic growth if the current trend is not reversed.  Of course, the effects are relatively long-term, rather than the immediate time horizon the president and his constituency look to.  While it was  hoped we could spend our way out of the current recession (a la the "stimulus"), we have seen that this does not work, sustainable jobs are not created and our National Debt has grown to $16 trillion - larger than GDP - the measure of overall production for the entire country.  

As the debt grows, interests rates increase on the debt as the risk of default grows.  Anyone remember Latin American countries defaulting on their national debt?  But can't we just grow the economy to pay it back?  As anyone with increasing levels of personal debt knows, a greater percentage of your income goes to servicing your debt, squeezing house hold spending.  As the nations debt increases, taxes need to be raised to cover the debt burden while domestic spending gets squeezed putting the brakes on the economy even further.  Contrary to popular belief promoted during the election, we could seize the entire income of the top 1%, or 5% for that matter, and still not make a dent in the debt!  This then becomes the future we are saddling our children and children's children with while we refuse to reign in spending and refuse to learn the lessons of history and spending our way out of trouble.