It’s the Entitlements, Stupid!

November 29, 2012

G’Day!

With apologies to President Clinton for modifying his famous phrase, this time “It’s the Entitlements, Stupid!” Virtually everyone with a functioning brain knows that our exploding National Debt and $1 trillion annual Federal Deficits are unsustainable. Without a solution to this government-imposed national crisis, the American economy will continue to stagnate, unemployment will be high, job opportunities low, and the country may ultimately decline into bankruptcy. Also, anyone with a functioning brain knows that the solution to this problem must involve compromise and agreement among the three (3) fundamental contributors to the problem; “Entitlements,” “Discretionary Spending,” and “Tax Revenues.” By listening to the Media, President Obama, and the Democrats, you would conclude that the sole cause of our country’s fiscal and debt crisis is insufficient “Taxes on Rich.” Nothing could be further from the truth. This is like trying to stand on a 3-legged stool with two of the legs removed.

Let’s analyze President Obama’s only publicly proposed solution, “Tax the Rich.” Our annual federal deficit is currently $1.3 trillion. Obama’s proposal with possible outcomes is presented below:

Obama “Tax the Rich” Proposal

Possible Annual Revenue (billions)

% Deficit Solved

Raise top 2 rates on Incomes above $200-250,000 from 33 to 35% & 36 to 39.6%

$44.2

3.7%

Raise Dividend tax from 15% to Ordinary Income Rate

$20.6

1.7%

Raise Capital Gains tax fro 15% to 20%

$3.6

0.3%

Reinstate the Pease limit on Itemized Deduction

$12.3

1.0%

Reinstate the Personal Exemption Phase-out (PEP)

$4.2

0.4%

Subtotal Tax increase for Upper-income

$84.9

7.1%

Restore Estate & Gift Tax to 2009 levels

$11.9

1.0%

Total Government Tax Revenue

$96.8

8.1%

 

The above result is a static analysis and assumes no income or behavioral change by taxpayers (highly unlikely). In total, Obama’s “Tax the Rich” solution would potentially generate $96.8 billion per year and solve a mere 8.1% of our annual fiscal deficit problem. Since neither Obama nor the Democrat leaders have publicly suggested any change in either “Discretionary Spending” or “Entitlements,” this would leave a continuing federal deficit of approximately $1 trillion per year or 92% of the fiscal problem unresolved. (Interestingly, a $1 trillion annual deficit is the amount in Obama’s currently proposed budget for the next four (4) years.) This is blind insanity and “Ostrich Management.”

“Entitlement” reform for Medicare, Medicaid, and Social Security combined with growth oriented “Tax Reform” and “Discretionary Spending” cuts are the only ways we can avoid the trap that Greece and other European socialist countries have created for themselves. By insisting ONLY on “Taxing the Rich” with no consideration for “Discretionary Spending” cuts or “Entitlement” reform, Obama appears to be more interested in political ideology than in solving our nation’s economic problems. Without correction, we will create a European slow growth dependent society for America and potentially financial collapse. We must demand a better and more comprehensive performance from our government. I believe the Republicans are correct in demanding that any agreement on additional tax revenues must be accompanied by significant cuts in federal spending.

Let’s review some fundamental facts about our unsustainable National Debt and continuing Fiscal Deficits. The table below summarizes the major items in our national economy and Obama’s 2012 enacted budget.

Item

2012 Budget Amount (Billions)

Total Current National Debt

$16,200

Estimated Gross Domestic Product (GDP)

$15,797

Total Federal Government Receipts (Tax, etc.)

$2,469

Total Federal Government Outlays

$3,796

Annual Federal Surplus (Deficit)

($1,327)

Total Mandatory “Entitlement” Outlays

$2,252

Health (Medicaid, etc.)

$361

Medicare

$484

Social Security

$818

Income Security (Food Stamps, Unemployment, Housing, etc.)

$580

Net Interest on Debt

$225

Total “Discretionary” Outlays

$1338

National Defense

$702

Education

$79

 

Federal outlays in 2012 are expected to be $3.8 trillion (24% of GDP) with a $1.3 trillion deficit after government revenues of $2.5 trillion. Mandatory “Entitlements” total $2.3 trillion, (60% of federal outlays and approximately 15% of GDP), AND are growing at an alarming and unsustainable rate. Discretionary federal outlays (including National Defense) are $1.3 trillion. Simple math indicates that to balance the budget without “Entitlement” reform, the entire Federal Government “Discretionary Spending” (including National Defense) must be eliminated or tax revenues increased across-the-board by approximately 50% to eliminate the deficit. Neither of these alternatives individually or in combination is feasible or desirable. Currently the largest federal “Entitlement” outlays are: Health (Medicaid) & Medicare $845 billion, Social Security $818 billion, Income Security $580 billion, and Interest on Debt $225 billion. (Please note that “Interest on Debt” is unusually small based on an artificially low interest rate (approximately 1-1.5%) resulting from global economic problems and monetary support by the FRS. When interest rates return to normal levels the $225 billion could easily double or more in a very short period of time. Remember, interest rates were in the double digits in the late 1970s and early 1980s. Just look at the recent government borrowing rates in the troubled countries in Europe.)

While the mandatory “Entitlement” programs have good intent and are desirable, they are not sustainable and are inconsistent with economic growth policies. “Entitlements” are where the big federal outlays reside and must be part of a major solution to our fiscal and debt crisis. “Entitlement” reform is the most significant fiscal spending problem we face. Fortunately, we have excellent proposals from Conservatives and bipartisan groups available on how to fix “Entitlements” (see Bowles-Simpson, “The Moment of Truth,” Domenici-Rivlin, “Restoring America’s Future,” and The Heritage Foundation, “Saving the American Dream”). It would be helpful if Obama and the Democrats would acknowledge these or offer proposals of their own. It won’t be easy but as I said in the title, “It’s the Entitlements, Stupid!”

Let’s get to work and save our country!

The Old Guy PhD


Debate Round Two – Romney Wins with Truth & the Economy

October 17, 2012

G’Day!

First, hooray for Ryan in the Vice Presidential Debate! He withstood a frontal attack by the Democrats’ chosen “Pit Bull”, Joe Biden and Won! Biden inappropriately and disrespectfully interrupted, laughed, and expressed contempt while Ryan was discussing the serious issues facing America. Biden’s rude and comic behavior illustrated his and Obama’s disdain for the problems facing our country. Also, it is important to note that Biden misrepresented (or lied?) on major issues approximately five times in the course of the debate. (Remember, Vice President Biden is only a heartbeat from the Presidency – is he your choice as a backup?)

Congratulations to Romney for beating Obama again (& biased liberal moderator, Candy Crowley) in the second Presidential Debate with honesty, strength, new ideas, and an unbiased picture of the declining American economy. Equally important, Romney has new ideas and reiterated his 5-Part Plan to correct the Obama economic malaise – Energy Independence, Free Trade, a Balanced Budget, Improved Education, and Tax Reform to support Small Businesses. For his part, Obama merely offered a rehash of his failed policies of the last 3 ½ years, a belief that taxing the “rich” will solve the debt crisis and create wealth and prosperity, and repeated his “bumper sticker” slogans blaming everyone but himself. Obama says that the Republicans want to return us to the failed policies of past. Does he mean free market capitalism, personal freedom, and limited government? Or does he mean the failed policies of socialism, communism, and wealth redistribution, which have historically failed and are currently failing in Europe?

Romney also continues to win women voters with his focus on fairness, jobs, the economy, and bringing down the cost and improving choices in healthcare. Obama appears to believe that the important women’s healthcare issues are taxpayer funded abortions and birth control. If misinformation (deliberate lies?) and character assassination plus unsustainable deficits and potential national economic disaster are appealing to American voters, Obama will win in a landslide. Obama, Biden, and the Democrats have degenerated into employing the desperation tactics used by losers with no rational alternatives – they blame others for the problems; attack, ridicule, and misrepresent their opponents positions; attempt to change the subject; and accuse their opponents of lying! How low can they go? Fortunately, I have faith in the intelligence of the majority of Americans to think for themselves and see through the misinformation and character assassination techniques being used by Obama, the Democrats, and supported by the Liberal Media.

This election is a clear choice between individual freedoms, high growth free market capitalism, fiscally responsible limited government, and saving “The American Dream” vs. government-restricted personal and property rights, a slow growth government controlled economy, irresponsible and unsustainable growth in government, entitlements, and our National Debt, and destroying “The American Dream”. I sincerely believe that, if Obama and Biden are reelected, we are at best facing European style socialism and dependency, increasing taxes for ALL who pay them, and continued economic decline. At worse, we could face exploding National Debt and ultimately national financial collapse. Be aware and vote accordingly!

Think and remember that the freedoms, opportunities, and economic growth we have enjoyed for over 200 years were the result of hundreds of thousands of loyal and dedicated Americans who unselfishly fought and died in many wars to create and protect them. These brave men and women unselfishly served to protect our freedoms and to promote freedom and democracy not only at home but also throughout the world. Obama is deliberately or accidentally undermining and eroding these hard-won individual freedoms and our capitalist economy in order to bring centrally controlled wealth redistributed “fairness” through “Neo-socialism”. Under neo-socialism the government does not own businesses, it forces them through regulations and rules to conform to the wishes of appointed (not elected) central administrators. (Think of the Environmental Protection Agency (EPA), the Department of Energy (DOE), Obamacare “Death Panels”, the Dodd-Frank “Consumer Financial Protection Bureau” and “Financial Stability Oversight Council”, etc.).

As I have said before, the growth of Western Civilization and especially the United States was fuelled by the expansion of individual liberties, property rights, and a free market capitalist society. Our nation was established on the fundamental principle that government is the servant of the people, not that people are servants of government. It’s time to take back our country and return to the individual liberties, free markets, economic growth, and limited government we have long enjoyed. Vote in November!

The Old Guy PhD


The Presidential Debates – Romney Wins Round One!

October 4, 2012

G’Day!

Finally the American people were able to see both the real Romney and the real Obama on the same stage, at the same time, unfiltered by spokespersons or the biased Liberal Media. The debate was informative and enlightening and a huge victory for Presidential Candidate Romney.

Romney was enthusiastic and passionate, decisive, well prepared, well organized, and armed with better specifics of both his own proposals and those of Obama. Romney was more confident and professional in his delivery, firm but friendly in responding to the questions of the moderator, Jim Lehrer, and those of Obama, and quick to stand up for his principles and to correct the misinformation presented by the President. Romney stood solidly in favor the basic tenets established by our Founding Fathers in The Declaration of Independence, The Constitution, and The Bill of Rights. The most significant of which is a government limited to protecting national security, individual freedoms, private property rights, free markets, and providing fair and impartial justice. In his debate remarks Romney laid out a five part path to future growth and prosperity: Energy Independence, Free Trade, a Balanced Budget, Improved Education, and Tax Reform. I’m in – are you?

On the other hand, Obama was not well prepared, poorly organized (even rambling at times), and appeared uncomfortable in the setting and especially with Romney’s challenges and corrections of his misinformation. He was lackluster, hesitant, and vague in his presentation, repeatedly relying on the familiar “bumper sticker” slogans used during his campaign – “fair shot, fair share, same rules”, “failed policies of the past”, “saved us from the biggest recession since the Great Depression”, etc. How many times do we have to listen to this misinformation? During the debate President Obama looked bored, did not seem to want to be there, and became increasingly uneasy. Obama has not been seriously challenged since the primary against Hillary Clinton and even then the Liberal Press “had his back” as they have persisted in doing since his election. When everyone around you, including most of the Press, fawns over your very presence and you win the Nobel Peace Prize for actually doing nothing other than being elected, it is difficult, especially without a “teleprompter” or agents to spin the issues on your behalf, to be publicly challenged by an opponent who is equally or better educated, has far more experience, and has high religious and moral standards. It makes you wonder just how capable Obama is in serious negotiations with other world leaders? Obama did make it clear again that he believes Big Government, higher taxes, more regulations, less personal freedoms, and more spending are the answer to our economic, fiscal, and debt problems. Do you?

As stated in my last article, “The November Election-A National Intelligence Test for America!”, this election IS the clearest choice between two different visions for America: sound fiscal policy vs. unsustainable fiscal policy, less government vs. more government, more individual and business freedom vs. less individual and business freedom, lower taxes vs. higher taxes, free market capitalism vs. centrally controlled neo-socialism, stronger national defense vs. weaker national defense, private doctor-based healthcare vs. central government mandated healthcare, strong foreign policy vs. weak and apologetic foreign policy, and, perhaps most importantly, more support for The Constitution vs. less support for The Constitution. These are the real issues from the debate and which we will be voting for or against in November. Do not make the mistake of letting Obama’s campaign rhetoric and a prejudiced Liberal Media systematically brainwash and deceive you into failing to think for yourself and to vote for what is right for our county.

As I have stated in previous articles, our nation was established on the fundamental principle that government is the servant of the people, not vice versa. It’s time to take back our country. Vote in November!

The Old Guy PhD