Wednesday, February 20, 2013

President Obama is Either Confused, Mistaken or ... Maybe He's Just Lying About the Solution to the Nation's Fiscal Deficits ... Truth Telling's Time Has Come

In his State of the Union address last week, President Obama stated that we're 'more than halfway' on the road to a solution dealing with our nation's ongoing fiscal deficits and rapidly accumulating debt problems. Well, he's either confused, mistaken or lying about that 'more than halfway' conclusion.

In fact, what he's saying sounds a whole lot to me like he's practicing a future version of speaking Greek -- I guess he figures he might as well since he's guiding the U.S. down the path to bankrupt Greece -- with lots of help from the Congress, of course.

Ditto for the entirely political vote getting 'solution' of getting the rich to pay their 'fair share' in taxes as a remedy for our nation's financial mess. That won't do it either. It's just populist progressive political happy talk and there's no genuine substance to it. None at all.

As a nation, we're whistling past the "debt yard," and our "Progressive-in-Chief" president doesn't help matters at all when he repeatedly tells untruths to We the People. And not only because he's confused, mistaken or lying to us, but more important, some people actually believe what he's saying. And even though we'd all like to see the solution to fixing our financial woes be that easy and not involve pain for the non-rich bulk of voters, the 'middle class' and the oldsters, the remedy to our nation's financial troubles won't be an easy one. Not even close to being easy, as a matter of fact.

It's time to tell the truth and reverse course. While there's still plenty of time to do so. Besides, who wants our kids and grandkids to have to learn and speak Greek?

Next Stop, Greece is subtitled 'Debt Crisis: If we fail to rein in spending and increase taxes -- starting now -- the U.S. in 22 years could be in worse shape than Greece is today:'

"In his State of the Union speech last Tuesday, President Obama concluded that "the State of our Union is stronger." The big question is: stronger than what? . . .

According to estimates by the Congressional Budget Office, adjusted by Barron's to account for recent tax increases and other factors, if the U.S. doesn't raise taxes further and cut spending dramatically, the national debt could easily reach 153% of economic output by 2035. {NOTE: That's where Greece is today.}

These are not just numbers. If the U.S. national debt continues ballooning, we can be sure of a deep, long-lasting recession -- very likely a depression -- sometime in the next two to three decades. The unemployment rate could easily surge to 20%. . . .
This problem can't be solved by asking the rich to pay a little more, despite what the president says. In fact, Barron's calculates that immediately increasing the marginal tax rate to 50% on the top 1% of the country's earners would bring in $500 billion over the next 10 years. This would barely dent the country's debt load, which would then be $20 trillion, and do little to forestall a financial crisis.

 Getting the national debt under control will require tax increases for everyone, as well as budget cuts, particularly in entitlement spending, which is beginning to run out of control as the baby boomers hit retirement age. . . .
One key driver of this crisis scenario is inevitable: the aging of the baby boomers. As the chart shows, the rise in the share of the population 65 and over -- the age of eligibility for Medicare -- has just begun. Born from 1946 through 1964, the boomers will range in age from 49 to 67 this year. As they continue to age, the over-65 portion of the population, now 14.1%, will gradually climb, exceeding 20% for the first time in 2029, when the youngest boomers, born in 1964, will be turning 65.

Not coincidentally, around 2029 the ratio of U.S. government debt to annual economic output, or gross domestic product, will begin to exceed its peak of 112.7%, set in 1945, the final year of World War II. The difference, however, is that, with a major war concluded, the expectation then was that U.S. indebtedness would decline. Indeed, by 1955, the ratio had plummeted to 55.5%. In 2029, in contrast, the expectation will be for indebtedness to continue to explode.
The connection between the baby-boomer time bomb and the rising debt-to-GDP ratio reveals that the next 10 years, for all their potential difficulty, are actually the relative calm before the coming storm. And yet the 10-year outlook has framed the current discussion of the debt in Washington. . . .

The CBO added that, "Unless the laws governing those programs are changed -- or the increased spending is accompanied by corresponding reductions in other spending, sufficiently higher tax revenues, or a combination of the two -- debt will rise sharply, relative to GDP, after 2023.". . .

In his State of the Union address, the president claimed that efforts to tame debt and deficits had already progressed "more than halfway." In his view, then, all that remains to be done is to duplicate what has been done so far. Our assumptions easily accommodate that; in fact, the second and third scenarios, which factor in tax increases, exceed what has been done so far by a wide margin. Yet in all three cases, the long-term trajectory is still daunting. {NOTE: Translation is that president Obama is feeding us crapola.} . . .

Unless President Obama proposes drastic spending cuts, his vision for America requires imposing crippling taxes on the very people whose continued prosperity he so strongly champions -- the lower 99%. Even a 25% tax hike on this broad group wouldn't be enough to solve the budget problem unless it was combined with sharp cuts in spending.

Once this becomes clear, things could get ugly. "If the United States encountered a fiscal crisis," observed the CBO in its July 2010 Issue Brief, "the abrupt rise in interest rates would reflect investors' fears that the government would renege on the terms of its existing debt or that it would increase the supply of money to finance its activities or pay creditors and thereby boost inflation."

Add to that nightmare scenario the risk that Uncle Sam would have to renege on promises made to people over 65."

Summing Up

While the well researched study, which is this week's cover story in Barron's, is admittedly a bit deep in numbers and assumptions, it's definitely worth taking the time to read in its entirety.

Our nation's future well being is too important to leave to the short term oriented populist progressive politicians to decide.

The truth is the truth, the facts are the facts, our children's and grandchildren's futures are in our hands, and We the People simply aren't being told the truth about the perilous nature of our nation's fiscal condition and where, left uncorrected, it will inevitably lead America.

All that simply means that now more than ever, it's necessary for us to "seek and tell the truth" to ourselves and each other.

This issue is too important to the well being of future generations of Americans for us to continue the now well entrenched twin practices of can kicking and smoke and mirrors budgeting.

This shameful approach by our nation's politicians can't be allowed to continue.

It's not "fair" of us to let them do so. Not to the poor, not to the middle class and certainly not to future generations of Americans. And not to us oldsters either.

That's my take.

Thanks. Bob.



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