Why America’s debt must be addressed now 3

By Tom Quiner

I spent a couple of hours with my financial planner yesterday.

Something struck me: baby boomers like me can really be hurt if America’s indebtedness isn’t addressed quickly. And if Baby Boomers run out of money, our kids could be wiped out because there are so many of us Baby Boomers they’re going to have to take care of (and pay for).

That’s why America’s financial house needs critical addressing.

We hear things like we’ve got a $13.5 TRILLION national debt. But what does that even mean? It means that EVERY U.S. citizen enjoys a $356,000 liability. This doesn’t even count unfunded pension liabilities at the state and local levels that add up to another $574 billion.

What could happen? Last year, the Congressional Budget Office warned that …

“… it’s possible that investors would lose confidence abruptly and interest rates on government debt would rise sharply.”

The former Comptroller General of the U.S., David Walker, warned:

“We are heading for a future where we will have to double federal taxes or cut federal spending by 60%.”

Thomas Hoenig, President of the Federal Reserve Bank of Kansas City, warned:

“The fiscal projections for the U.S. are so stunning that, one way or another, reform will occur. Fiscal policy is on an unstainable course. The U.S. government must make adjustments in its spending and tax programs. It is that simple. If pre-emptive corrective action is not taken regarding the fiscal outlook, then the U.S. is precipitating its own next crisis.”

How did we get into this mess? For the first time in history, according to the Wall Street Journal, half of Americans receive some form of government payments.

How bad is it? Laurence Kotlikoff, writing for http://www.bloomberg.com, puts it this way:

“Based on the CBO’s data, I calculate a fiscal gap of $202 trillion which is more than 15 times the official debt.”

Have you ever thought of the ramifications if America went bankrupt? It is possible if we don’t halt and reduce our spending binge.  And the consequences would be dire:

1. Your life savings could be dramatically reduced as government inflates the currency in a foolish attempt to pay off debtors with funny money.

2. Your taxes will skyrocket. We can’t do it on the back of the rich. There just aren’t enough of them. As things stand now, only 53% of households in the U.S. even pay any federal income taxes.

3. Your social security and medicare payments would be jeopardized. The money for these programs aren’t stashed away in a vault. They come from your neighbors who pay taxes. If the U.S. is scrambling to pay off debtors, you may be left holding the bag.

4. Your standard of living will drop off a lot. National bankruptcy will plunge us into the worse economic downturn since the Great Depression, if not worse.

I get sick of hearing about doomsday scenarios, so forgive me for presenting such depressing information. But we can fix our fiscal problems if Congress begins acting like adults. In other words, they have to make tough decisions. That’s their job. They’re the ones spending the money. Congress needs to reduce spending now. Don’t tell me “we’re all responsible.” We’re not. Congress controls spending.

Congressman Paul Ryan’s “roadmap” is the only serious plan being presented. It’s not perfect, but it is intelligent, and it is doable.

We’d better do something fast. Time isn’t on our side.

Why high unemployment is here to stay Reply

By Tom Quiner

In a typical economic recovery, the economy starts growing and eventually job creation follows suit.

I’m not overly optimistic about the likelihood of a robust surge in job creation because of Obamacare.

Let’s say you’re a small business owner with 47 employees. Obamacare creates a disincentive to add new employees, because once you hit 50 employees, you must provide health insurance or face stiff fines.

In other words, Obamacare increases the cost (and risk) of expansion.

The President is now telling health insurance companies how much profit they can earn, something marketplaces used to do with the oversight of state insurance commissioners. So what’s wrong with that? For one, it’s none of the federal government’s business. For another, insurance companies will be forced to cut benefits and even abandon unprofitable states. Consumers will have fewer choices, which leads to higher costs for employers to insure their employees.

What a job killer!

Obamacare has created tremendous uncertainty with employers. Uncertainty is the ultimate kiss of death for job growth.

Obamacare is poison to anyone looking for a job or fearful of losing their job.

Will lame-duck Democrats increase taxes and federal spending? Reply

By Tom Quiner

Tax rates are going up on all earners unless Democrats prevent it.

Republicans are 100% on board to prevent tax rates from going up, which is what will happen if the Bush tax cuts from 2001 and 2003 are allowed to expire.

Nancy Pelosi wants to increase rates  for America’s most-productive workers. She says she is against tax-cuts for the “rich,” but that is a less than honest way to characterize what will happen. She and her party, unless they prevent it, want to raise rates above what they have been for the last seven to nine years on the slice of earners who have the most ability to create jobs.

We have suffered through a steep recession. The economy has officially crawled out of recession, but job creation isn’t following suit as the unemployment rate continues to hover near ten percent.

Increasing taxes is a bad idea when the economy is shaky.

Democrats are also agitating to once again extend unemployment benefits. They want to do it in the name of compassion and economic growth.

We all understand and appreciate compassion when compassionate results are achieved. Unfortunately, the extension of these benefits actually delays job creation according to Larry Summers, Director of President Obama’s National Economic Council. In a 1995 paper, he said:

“Unemployment insurance lengthens unemployment spells.”

Did you notice how fast the unemployment rate shot up last year? It ballooned from 7.2% in January to 10.2% in October. What happened in between? For one, the administration’s so-called stimulus bill provided states with $40 billion to extend jobless benefits.

Mr. Summers himself admitted last July that:

“the unemployment rate over the recession has risen about 1 to 1.5 percentage points more than would normally be attributable to the contraction in GDP.”

In other words, the extension of unemployment benefits actually increased the unemployment rate. It acts as a drag on employment. As the Cato Institute’s Alan Reynolds puts it:

“When the government pays people 50 to 60 percent of their previous wage to stay home for a year or more, many of them do just that. When you subsidize something, you get more of it. Extending unemployment benefits from 26 to 79 weeks was guaranteed to leave many more people unemployed for many more months.”

Over at the Heritage Institute, James Sherk and Patrick Tyrrell quantified the long term damage done to one’s employment opportunities when unemployment benefits are extended:

“Many other researchers have come to the same conclusion. Researchers at Harvard found that extending unemployment insurance eligibility by 13 weeks increases by two weeks the amount of time that workers remain unemployed. Each additional week that the government extends UI benefits extends the length of time the average worker stays unemployed by 0.16 to 0.20 weeks. Since some workers find jobs in the first month of unemployment, extending UI means significantly longer periods of unemployment for those who do not start work quickly.”

If the compassionate result is for workers to return to gainful employment, then another extension of benefits is, in fact, devoid of compassion. And this extension is going to cost taxpayers another whopping $56.4 billion. How are Democrats going to pay for all of this mock-compassion?

Tax increases? That’s not compassionate either if it suppresses job creation.

Cuts in spending elsewhere in the budget? I’ll believe that one when I see it!

Lame-duck Democrats are faced with a sober choice: do they increase taxes and government spending even more by extending jobless benefits even if it hurts the people they’re trying to help?

Or do they hold the line on tax increases and government spending?

If compassionate results matter more than politics, let’s renew the Bush tax cuts and let’s hold the line on an extension of jobless benefits.

The Party of Growth 2

By Tom Quiner

The time has come for the Republican Party to begin acting like Republicans again.

This week’s election is not a mandate for Republicans, but rather a mandate for Republican ideas. One of America’s best and brightest pundits is the Wall Street Journal’s Daniel Henninger. He talked about what Republicans need to do in today’s column:

“The simplest way for the Republican Party to free itself and the economy from this unending Beltway hell is by reviving a core belief of one of the country’s most successful presidents: If the government will get out of the way, Ronald Reagan argued, there’s no limit to what the American people can achieve.”

And there you have it. Democrats believe in the power of the government. Reagan Republicans believe in the power of the people and free markets. As I pointed out in my post yesterday, Republicans collaborated in the explosion of government spending under Bush II. Not to be undone, President Obama has left President Bush in the dust.

When President Bush II left office, the federal government controlled 35 percent of our economy. In two short years, Mr. Obama has increased the share to 44.7 percent, ahead of socialist-leaning democracies like Great Britain and Germany.

Do we want this much power, this much of our dwindling wealth, shipped into the beltway for bureaucrats to determine what’s best for America?

It’s time for Republicans to say no. As Mr. Henninger said:

“Congressional spending is the locus of Washington’s power. They decide who gets reprocessed taxpayer money and who doesn’t. This sustains the regulatory bureaucracies and all those orbiting Washington lobbyists. That is the solar system known as Inside the Beltway.”

Republicans need to listen to President Reagan. Let’s take back our country from the big spenders in Washington who are making our country worse, not better.

The chart below shows it all. Our government is out of control.

I encourage you to take the time to listen to Ronald Reagan’s 1964 speech above. It struck me how it is immediately fresh and relevant. His ideas are timeless. We need these ideas more than ever.

Republicans: it is time to start acting like Republicans again. America is hungry for you to once again be the party of growth. Ronald Reagan talked about it in 1964, and then he put his ideas into action when he became President. Guess what? They were wildly successful.

Let’s get to work!

The danger of unrealistic expectations Reply

By Tom Quiner

President Obama was set up to fail by his own bloated rhetoric and a fawning press that didn’t do their job.

The video clip below of a supporter of the President’s reveals the problem:

His supporter, Peggy Joseph, gushes that an Obama administration will fill her gas tank and pay her mortgage, a somewhat unrealistic expectation even in light of Mr. Obama’s goal to take money from those who earned and give it to those who didn’t.

As Obamanomics continues to sputter, the time has come to pay the piper for the grandiosity of his hollow eloquence.  The video below lays it on the line:

His supporter is disappointed:

“… quite frankly, I’m exhausted. I’m exhausted of defending you, defending your administration, defending the mantle of change that I voted for, and deeply disappointed with where we are right now. I’ve been told that I voted for a man who said he was going to change things in a meaningful way for the middle class. I’m one of those people and I’m waiting, sir, I’m waiting. I don’t feel it yet. And I thought while it wouldn’t be a great measure, I would feel it in some small measure. I have two children in private school, and the financial recession has taken an enormous toll on my family. My husband and I joked for years that we thought we were well beyond the hot dogs and beans era of our lives. But quite frankly, it’s starting to knock on our door and ring true that that might be where we’re headed again.

And quite frankly, Mr. President, I need you to answer this honestly, is this my new reality?”

The President once said in discussions on when life begins, that it was above his pay grade.

The economy is above his pay grade, too. In defense of the President, it’s above everyone’s pay grade in this respect: the free enterprise system revolves around millions of individual economic decisions being made by individuals and businesses on an hourly basis.  Top down economic control doesn’t work.  Ask the Soviet Union. Ask Cuba.

The President’s embrace of the European model of high taxes, big government, and a cradle-to-grave nanny state is a job killer.  Simply look at Europe if you don’t believe it.

To the Obama supporter who asks, “is this our new reality?” The answer is yes unless we get a handle on our runaway spending and scale back the growing nanny state.

Republicans should learn a few lessons from the President. Temper your rhetoric. Present common sense proposals on what you will do differently should you regain some Congressional clout after the midterm elections.

The public is increasingly disappointed with the President. But they like Mr. Obama more than they like the Republican party. Winning the election isn’t the only issue for Republicans. We want some real adults in Congress. Democrats have failed us. Republicans, can you do better?