Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: National Debt

Fitch Threatens Downgrade; Boehner to Surrender

This article first appeared at The New American online on Wednesday, October 16th, 2013:

 

Despite mounting evidence that the government will have more than enough money to pay its essential bills and that the real national debt is $70 trillion, not $17 trillion, and despite pressure from Tea Partiers and constitutionalists to resist, House Speaker John Boehner is likely to bring the Senate bill to a vote in the House where, if House Minority Leader Nancy Pelosi is right, it will

Keep Reading…

The Press Release from the Treasury Department is Pure Propaganda

This article was first published at The McAlvany Intelligence Advisor on Monday, October 7, 2013:

The so-called “brinkmanship” press release by the Treasury Department reveals far more about the willingness of the media to report and repeat a canard that it does about the “crisis” facing the US if the government defaults.

Here are the title and just the opening paragraphs from the Treasury Department:

Keep Reading…

Deficit down, national debt up, more taxes needed say two “nonpartisan” groups

Two government reports issued in the last few days show that despite higher tax revenues, thanks to the tax increases signed into law by the president earlier this year, deficits are still sky-high and the national debt continues its inexorable climb into the stratosphere.

Although the deficit for the first eleven months of the 2013 fiscal year was down slightly compared to last year at this time, real progress towards a balanced budget remains elusive. Through August the federal government spent

Keep Reading…

University of California Study: The National Debt is really $70 Trillion

Professor James Hamilton, economics professor at the University of California, San Diego, just published his best estimate of the federal government’s “off-balance-sheet” liabilities and concludes that the real national debt, popularly estimated to be $16.9 trillion, is in fact more than four times larger: $70.086 trillion. This is because of decisions to

Keep Reading…

Central Banks’ bubble is bursting, sending markets down worldwide

When the Japanese stock market lost more than 6 percent of its value on Wednesday in a massive selloff, pundits jumped on the move to try to explain what happened, and what it all means. Evan Lucas, a market strategist at IG Markets, wrote:

Keep Reading…

S&P Issues an Upgrade of US sovereign debt along with a warning

In the announcement by credit rating agency Standard & Poor’s on Monday that affirmed its AA+ rating of United States sovereign debt while revising upward its outlook from “negative” to “stable,” the agency explained that in the short run there has been some perceptible improvement in the country’s fiscal situation but in the long run

Keep Reading…

Social Security Trustees Celebrate: Trust Funds won’t be Broke for Years

With Friday’s announcement by the Trustees of the Social Security Administration that “reserves are still growing and will continue to do so through [the year] 2020,” it didn’t take long for groups like Strengthen Social Security (SSS) to chortle that not only is Social Security “fully affordable and structurally sound, [but it] will

Keep Reading…

A video that explains everything about the national debt

Here is the link to the video that explains everything. It is clever, it is simple, it is devastating. No large numbers are involved. But the point is well made: this loser (us) is going to default on what he owes, or else pass the debt on to his kids. Guess what option he selects?

Keep Reading…

Calvin Coolidge: the Man Nobody Knows

Thanks to a remarkable essay by a remarkable historian, the story of Calvin Coolidge is just now getting some attention and appreciation. Known as Silent Cal , historians have largely ignored him because he wasn’t a

Keep Reading…

The Gloomy Report from the CBO is Too Optimistic

On its face the latest report from the Congressional Budget Office is gloomy enough, but careful sifting through it reveals

Keep Reading…

House Backs Off on Debt Ceiling Threat, Prepares for Budget Battle

Calling it a debt limit “suspension,” the House GOP is voting today on a measure to allow the federal government to continue to spend until May 19th, at which time it will reconsider the issue once again. It also

Keep Reading…

Krugman the fool

As Dr. Kenneth McFarland said many years ago, people should write a column only when they have something to say.  Unfortunately, Dr. Paul Krugman has to meet a deadline and therefore must write an article even if he doesn’t have anything to say. Sometimes it’s worse:

Keep Reading…

Five good men in Washington

Katie Kieffer has named them: They are all Senators:  Rand Paul, Richard Shelby, Chuck Grassley, Marco Rubio, and Mike Lee. Each voted “no” on the fiscal cliff deal that roared through the Senate like a runaway pickup truck leaving the scene of an accident.

Katie says:

I expect my leaders to keep their word. If they tell me they are Republican, I expect them to

Keep Reading…

Fiscal Cliff Funny Numbers: Taxpayers Pay More Yet Deficits Rise

Uncle Sam is Broke

Uncle Sam is Broke (Photo credit: Infrogmation)

Now that the House of Representatives has virtually rubber-stamped the Senate bill to avoid going over the fiscal cliff – the so-called American Taxpayer Relief Act of 2012 (ATRA) – which President Obama is expected to sign shortly, commentators have been working feverishly to determine exactly what is in the 157-page bill that no one had time to read before being rushed to completion at the very last minute.

The analysis by the Congressional Budget Office (CBO) measured the impact of ATRA against its baseline assumption that the congress would do nothing and let all the pieces and parts of the fiscal cliff occur automatically. In that baseline, annual government deficits would have been cut in half, from $1.1 trillion to about $640 trillion. But under the new law, the national debt will increase by

Keep Reading…

Where Are the Spending Cuts?

Cutting your Spending

Cutting your Spending (Photo credit: Tax Credits)

The fiscal cliff “deal” about to be signed into law by President Obama is all about tax increases. This is what The One has wanted since he got into office. He wanted to overload the system so much that taxpayers would be forced to pay more. It’s more of the “leveling” required to push the US down relative to other deadbeat nations who also can’t pay their bills. The easier to be “absorbed” into the new world order run by non-elected elites. But I digress…

According to the Congressional Budget Office (CBO), the “deal” consists of $15 billion in spending cuts (over the next ten years, mind you) compared to $620 billion in new taxes – a ratio of 41:1. What a deal!

“We’ll address spending cuts later” is now the cry from sycophants like Grover Norquist. “We got a deal we can live with,” they say. “Now let’s get down to business.”

Sorry. Business is already done. That window of opportunity to hold the government accountable is closed. Obama got what he wanted. Boehner caved in. End of discussion.

I’m biased (!). But I think the fiscal cliff turned out to be a speed bump on the road to more

Keep Reading…

Debt Ceiling Debate Now Set for February 2013

The debt ceiling is expected to be reached, officially, on Monday, December 31st, when the national debt reaches $16.4 trillion. Unofficially, with various “extraordinary measures” employed, the Treasury won’t bump into the real limit until early February.

Those measures will give the Treasury some $200 billion in “headroom” and since the government is borrowing $100 billion every month, the math is easy. The question then becomes:

Keep Reading…

College students preparing for what?

The Bureau of Labor Statistics (BLS) has done us another favor: it has blown the cover off the perception that a college degree is worth the money. Their listing of the top 30 occupations in job growth for the next 8 years shows that only five of them need a college degree!  They are

Keep Reading…

More of America’s National Debt Being Bought by Foreign Governments

On Monday, December 17th, the US Treasury Department announced that China and Japan have increased their purchases of United States government securities despite concerns over the continuing negotiations about the fiscal cliff. Foreign holdings rose to $5.5 trillion in October, or about one-third of the country’s $16 trillion national debt. The increased interest in owning US government debt by foreign governments is welcome as the government’s monthly deficits continue growing at about $150 million every month. 

Although China is often referred to as the primary financier of America’s continuing profligacy, that country’s total holdings, some $1.16 trillion, represents just a little over 7 percent of the US’s national debt. Japan comes in at second place, owning $1.13 trillion, with Brazil holding $255 billion.

In contrast, two-thirds of the country’s national debt is owed by individual American investors and by Social Security and civil service and military pension plans. The balance of $1.6 trillion is owned by the Federal Reserve.

How much longer can such profligacy with its resulting trillion-dollar annual deficits continue? Back in 1995, Harry Figgie wrote Bankruptcy 1995 and predicted the end would occur within five years:

The good news and the bad is that neither we nor any other nation can continue the sin of deficit spending indefinitely. The laws of economics eventually exact their punishment, and we are dangerously close to getting ours.

Just as interest compounds in a savings account, it compounds on our debt. The $4 trillion debt we owed in 1992 becomes $6.56 trillion in 1995 and $13 trillion by the year 2000 just from the accumulation of deficits and interest alone.

Only a fool would contend that this insanity doesn’t have to end.

That was 13 years ago and yet that “day of reckoning” hasn’t arrived. Part of the reason is those “laws of economics” that resulted when interest rates were forced down by the Federal Reserve following the bursting of the dot.com bubble and have remained historically low ever since. That brought the cost of borrowing to record lows as well. For instance, the percentage of taxes that were devoted to interest payments on the national debt in 1991 was nearly 20%, but by 2003, it had declined to just over 8 percent. When compared to the country’s gross domestic product, interest was eating up just 1.4% of it. As Bill Sardi noted, “America was saved by cheap money.”

But with interest rates at near zero, how much longer will investors, foreign and domestic, continue to put up with such low returns in the face of an ever-increasing risk of default? Following the debt ceiling crisis during the summer of 2011, the rating agency Standard and Poor’s downgraded its rating on U.S. Government debt for the first time in history. And unless something positive comes out of the fiscal cliff negotiations, Fitch Ratings is likely to follow.

The Tax Policy Center, using rosy economic assumptions, projected that deficits would continue at least out to the year 2017, and would average $700 billion a year. As Sardi noted, “There is no substantiation for this scenario.” And so something’s got to give.

Indeed, if the average monthly deficits of $150 billion were simply extended in a straight line into the future, deficits over the next five years would add $9 trillion to the national debt, bringing the total to over $24 trillion by 2017.

There are several reasons why that “day of reckoning” may in fact be years away. For one thing, where else would China and Japan invest their surpluses? Name one country that boasts, at least on paper, a better credit rating than the US. With Germany and Japan in recession, and the Eurozone countries struggling to stay afloat, options for “safe” places to invest are limited.

Second, because at present the US dollar is the world’s reserve currency, there continues to be a demand for them no matter what they might be worth. Since Saudi Arabia must deal in dollars when selling the West their oil, there is a floor under that demand. And the recent drop in the price of oil shows, for the moment at least, that Saudi Arabia is happy with the arrangement.

And then there’s the Federal Reserve offering itself as the lender of last resort, announcing last week that it will continue to buy at least half of the government’s deficit for the foreseeable future.

The “day of reckoning” may instead occur in baby steps as the value of the American dollar continues its slow decay in purchasing power.

Despite the cries of worthies like Figgie and Sardi that the end is near, it may not be. The cross-currents of forces demanding further deficit spending are increasingly being met by demands for fiscal sanity will likely put off that “day of reckoning” for a long time, perhaps years into the future. That may indeed be enough time for those demands for sanity to be heard by enough in Washington to begin the sensible rebuilding of the country’s fiscal integrity, in which case the “day of reckoning” would happily never arrive.

 

 

 

 

The Fiscal Cliff’s not the Real Problem

In Sunday’s article in the New York Post, Cato scholar Dan Mitchell made an excellent point: it’s not the fiscal cliff that’s the problem. It’s what comes afterwards.

If we go over the fiscal cliff, not much is likely to happen, he says:

If we go over the cliff, it simply means the economy will grow a bit slower and politicians will spend a bit more money. And the sequester actually would be (modest) good news, since it means the burden of government spending would be “only” $2 trillion higher 10 years from now, rather than $2.1 trillion higher.

In other words, nothing much will change. But that also means that no matter how things are sorted out come the first of the year, the real problem underlying today’s crisis won’t been touched:

The real crisis is the ticking time bomb of entitlement programs and the welfare state.

Unfortunately he thinks that things will appear to be normal for a long time, thus putting off for that same long time any chance that any substantive will be done until it’s too late:

This bomb won’t explode this year or next year. It may not even explode for another 20 years. But at some point America will experience a Greek-style fiscal collapse if these programs are not reformed.

It’s a simple matter of math due to an aging population. According to both the Bank for International Settlements and the Organization for Economic Cooperation and Development, the future burden of US spending will climb so high that we’ll be in worse shape than Europe’s welfare states.

He warns that the problem is vastly larger than just a national debt of some $16 trillion.

A lot of people get upset about the national debt, which is somewhere between $11 trillion and $16 trillion, depending on whether you include money the government owes itself.

Those are big numbers — but if you add up the amount of money that the government is promising to spend for entitlement programs in the future and compare that figure to the amount of revenue that the government projects it will collect for those programs, the cumulative shortfall is more than $100 trillion.

I think the number is even larger, but no matter. It’s so vastly beyond anything even being admitted to in Washington that it might as well be a quadrillion. Those promises won’t be paid. They will be broken. And people depending on them will have to make major painful readjustments to the new reality. But not just yet:

When the status quo [becomes] unsustainable, the “bond vigilantes” will be the ones in charge. And when they cut up Washington’s credit card, it won’t be a pretty situation — especially since there won’t be anybody left to bail us out.

Compared to that scenario, the fiscal cliff is a walk in the park.

The Fiscal Cliff: What Really Needs to Be Done

Piggy Bank

(Photo credit: Images_of_Money)

Now that the national elections are history, attention in Washington is firmly focused on the “fiscal cliff”: the day of reckoning created by the congress during the budget ceiling debate in the summer of 2011. When the Super Committee failed in its mandate to create a plan to address the deficits and the national debt, the result was the misnamed Budget Control Act of 2011 which, in current parlance, kicked the can to December 31, 2012. All that act did was to raise the debt limit immediately by $400 billion, thus averting a government shutdown, while allowing further increases in the debt limit without another congressional confrontation with the White House. The tradeoff was the promise of spending cuts in the future.

That future is now.

If nothing is done, and the economy runs off the so-called fiscal cliff, the impact will be a combination of $7 trillion worth of tax increases and spending cuts over the next decade.

There will be automatic spending cuts of $120 billion annually in both defense and non-defense spending, there will be increases in income and capital gains tax rates, the reestablishment of the so-called “death tax” (the estate tax), 27 million households will now be subject to the “wealth tax” under the Alternative Minimum Tax (AMT), while those enjoying the payroll tax “holiday” will see their Social Security withholding taxes return to the 6.2% rate from the current temporary 4.2% rate. There would be the confluence of another flurry of other tax increases and spending cuts as well, including 27% cuts to Medicare providers and at least four other tax increases imbedded in Obamacare.

According to the Heritage Foundation, the fiscal cliff will cost families making $70,000 a year more than

Keep Reading…

Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.