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: Spending

Tax-reform Plan Called “Tremendous” by Trump, “Fake Math” by Schumer

This article appeared online at TheNewAmerican.com on Thursday, September 28, 2017:

In unveiling the tax reform “framework” cobbled together by the Trump administration, the House Ways and Means Committee, and the Senate Finance Committee on Wednesday, President Trump called it “tremendous”: “This is a tremendous change, and the biggest winners will be the everyday American workers as jobs start pouring into our country, as companies start competing for American labor and as wages start going up [to] levels you haven’t seen in many years.”

On cue, House Minority Leader Nancy Pelosi (D-Calif.) expressed her concerns about deficits, perhaps for the first time in her political career:

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Trump’s Regulatory Rollbacks Already Being Felt

This article appeared online at TheNewAmerican.com on Friday, September 22, 2017:

English: G. Edward Griffin

G. Edward Griffin

The latest report from the American Action Forum (AAF), which has been tracking President Trump’s promise to deregulate American businesses, continues to be upbeat. In April it had found that the repeal or delay of regulations imposed during the Obama administration could lead to $86 billion “in net fiscal effects” for taxpayers as a result. The latest from AAF said that the trend downward in regulations and upward in freedom from them continues apace.

In July the Washington Post counted 860 regulations that the Trump administration was either pulling or suspending, and then included commentary from anti-Trump liberals that

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China is Suffering from the Same Curse as the U.S.: Too Much Debt, Too Little Growth

This article was published by The McAlvany Intelligence Advisor on Friday, September 22, 2017:  

Live video feed of Zig Ziglar speaking at the ...

Zig Ziglar speaking at the Get Motivated Seminar at the Cow Palace in Daly City, California.

When Zig Ziglar was trying to motivate salesmen, he would often tell them that “there aren’t very many problems that can’t be solved by sufficient production.” This, unfortunately, has been picked up by statist economists who have assumed that any production, at any cost, will solve any problem. Put another way, “We can grow our way out from under the massive debt we have. And we can grow the economy by stimulating it with borrowed funds.”

Zig would be appalled:

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Steve Bannon – Both Friend and Enemy of Freedom – Returns to Breitbart

This article was published by The McAlvany Intelligence Advisor on Monday, August 21, 2017: 

It didn’t take Steve Bannon – Trump’s chief political strategist – very long to bid adieu and pick up where he left off at Breitbart. On Friday he explained his widely anticipated departure:

On August 7th, I talked to [Chief of Staff John] Kelly and to the President, and I told them that my resignation would be effective the following Monday, on the 14th. I’d always planned on spending one year. General Kelly has brought in a great new system, but I said it would be best [to leave]. I want to get back to Breitbart.

On Friday night, he was back at work as Executive Chairman at Breitbart, saying:

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Bannon’s Ouster as Trump’s Chief Strategist Largely Self-inflicted

This article appeared online at TheNewAmerican.com on Sunday, August 20, 2017:

Immediately upon his termination as President Trump’s chief political strategist last week, Steve Bannon returned to his former position as executive chairman of Breitbart News. In fact, within hours of his return he chaired an “all-hands” meeting to plan the future.

Bannon said it was all part of a plan: “On August 7th, I talked to [Chief of Staff John] Kelly and to the President, and I told them that my resignation would be effective the following Monday, on the 14th. I’d always planned on spending one year. General Kelly has brought in a great new system, but I said it would be best [to leave]. I want to get back to Breitbart.” Upon his return to Brietbart, Bannon said:

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Trump Takes Credit for Banner Jobs Report

This article appeared online at TheNewAmerican.com on Friday, August 4, 2017:  

Within 15 minutes of Friday morning’s release of the July jobs numbers by the Bureau of Labor Statistics (BLS), President Trump tweeted: “Excellent Jobs Numbers just released — and I have just begun. Many job stifling regulations continue to fall. Movement back to USA!”

He has good reason to cheer:

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Debt Ceiling Debate Charade Begins, Again

This article appeared online at TheNewAmerican.com on Wednesday, August 2, 2017:

Treasury Secretary Steve Mnuchin warned Congress in a letter sent Friday that they had precious little time to raise the federal government’s debt ceiling before his department ran out of money. He even put a date on when that would happen if the ceiling wasn’t raised: “Based upon our available information, I believe that it is critical that Congress act to increase the nation’s borrowing authority by September 29.”

That’s the day before the end of the government’s fiscal year, and closely coincides with the moment when the Treasury will be unable to pay the government’s bills. The Treasury’s cash balances are expected to drop close to $25 billion in September, dangerously low when compared to the government’s budget of $4 trillion.

Mnuchin no doubt is referring to the Congressional Budget Office (CBO) report released in June that reminded citizens that

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Democrats and Fiscal Reality Present Roadblocks for Trump’s Budget

This article appeared online at TheNewAmerican.com on Tuesday, August 1, 2017:

speaking at CPAC in Washington D.C. on Februar...

Deciding to move on following the failure of the Senate to pass the “skinny” ObamaCare repeal bill, the Trump administration announced on Monday its accelerated plans for passing its budget bill. According to Marc Short, President Trump’s director of legislative affairs, background work on the budget will take place in August in preparation for committee action in the House in September. Assuming little resistance there, Short hopes for a floor vote in October, a Senate vote in November, and the president’s signature on it immediately thereafter.

It’s good to dream big.

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Trump’s Growth Target Reduced to 3 Percent

This article appeared online at TheNewAmerican.com on Monday, July 17, 2017:  

For Mick Mulvaney, President Donald Trump’s director of his Office of Management and Budget (OMB), reality is setting in. On the campaign trail Trump repeatedly promised four percent growth in the GDP (gross domestic product): “We’re bringing it from 1 percent up to 4 percent. And I actually think we can go higher than 4 percent. I think you can go to 5 percent or 6 percent.” (October, 2016). Later that month he doubled down during a speech to an audience in North Carolina: “I’m going to get us to 4 percent growth and create 25 million jobs over a 10-year period.”

Mulvaney’s editorial in the Wall Street Journal on Wednesday was unapologetic: “We are promoting MAGAnomics — and that means sustained 3 percent growth.” This new tag, which incorporates the acronym for “Make America Great Again,” is a play on “Reaganomics” from the 1980s:

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Will Mulvaney Have Any More Success with MAGAnomics than Stockman did with Reaganomics?

This article was published by The McAlvany Intelligence Advisor on Monday, July 17, 2017:

English: Official portrait of US Rep. Mick Mul...

Mick Mulvaney.

After serving in the House as a Republican representative from Michigan, David Stockman served as President Ronald Reagan’s OMB director from January 1981 until he quit 4½ years later in frustration. He got half of Reaganomics passed – the tax reduction part. He failed in getting the other half passed – the government spending cut part.

Mick Mulvaney is now Trump’s OMB Director after serving in the House as a Republican from South Carolina. And his job is likely to be as difficult and frustrating as was Stockman’s.

It’s far too soon to speculate about Mulvaney.

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Illinois Republicans Override Governor’s Vetoes, Stiff Taxpayers in Budget Deal

This article appeared online at TheNewAmerican.com on Friday, July 7, 2017:

Lisa Madigan, Illinois state attorney general,...

Lisa Madigan. step-daughter of Michael Madigan, and, not surprisingly, Illinois’ state Attorney General. Just a coincidence.

When House Speaker Michael Madigan finally engineered the override of Illinois Governor Bruce Rauner’s veto of his budget bill on Thursday, he called it a victory:

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CBO Raises Its Deficit, Debt Forecasts in Latest Revision

This article appeared online at TheNewAmerican.com on Wednesday, July 5, 2017:  

The Congressional Budget Office (CBO) just revised its January report with new data on spending, revenues, and economic growth. The revision isn’t good:

The projected rise in [annual] deficits would be the result of rapid growth in spending for federal retirement and health care programs targeted to older people, and to rising interest payments on the government’s debt, accompanied by only moderate growth in revenue collections.

In other words, the CBO simply doesn’t believe that President Trump’s plans to reduce regulation, cut taxes, and repeal ObamaCare will amount to much. Instead the government programs on autopilot — Social Security, Medicare, and especially debt service on the country’s $20 trillion national debt — will eat up nearly 80 percent of the government’s total budget in less than 10 years. Said the CBO:

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The Wall Street Journal Tells Investors Not to Worry About Illinois. Really.

This article was published by the McAlvany Intelligence Advisor on Friday, June 30, 2017:

Seal of Illinois. Center image extracted from ...

Seal of Illinois.

The Journal declared that although the state of Illinois is in deep trouble, that shouldnt be troubling to those investors holding billions of the states debt that is about to be downgraded to junk. On Saturday morning, barring a miracle, S&P Global will keep its promise and announce that Illinoiss debt rating is being reduced by at least one more notch, to junk status.

The Journal said that downgrade reflects the fact that the state faces large uncertainties and has major exposure to adverse conditions. But none of those need bother investors, said the Journal. Even though several bond mutual funds have bailed since the first of the year, offloading an estimated $2 billion of the states $25 billion in investor-owned debt, the Vanguard Group is standing firm. It has the largest exposure to Illinois in its seven mutual funds, holding $1.2 billion of its debt and claiming that it is comfortable with (its) risk/reward.

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Illinois Countdown to Junk Status Continues

This article appeared online at TheNewAmerican.com on Thursday, June 29, 2017:

English: IL State Rep. Susana Mendoza 2011 Pho...

Susana Mendoza

Despite the clock’s ticking on the downgrade of Illinois’ $25 billion of indebtedness to junk status on midnight Friday, investors remain complacent. True, some mutual funds have offloaded $2 billion of Illinois debt in the last few months, but the Wall Street Journal provided salve to investors’ concerns that those remaining invested will be badly hurt. Unnamed analysts, wrote the Journal, “predict prices would drop only a few cents in the event of a junk downgrade.” They noted that Vanguard Group has $1.2 billion of Illinois bonds spread across seven of its bond mutual funds, with a company spokesman saying that it is “comfortable with the risk/reward” of investing in the state’s bonds.

Besides,

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Illinois Governor calls for “Unity,” Offers “Compromise” that is a “Capitulation”

This article was published by The McAlvany Intelligence Advisor on Friday, June 23, 2017: 

When politicians call for unity, they usually mean “what’s mine is mine and what’s yours is negotiable.” In the case of Illinois, Governor Bruce Rauner (shown)’s Tuesday night closed door compromise offer to intransigent Democrats to get them to agree to a budget before the June 30 deadline was called a capitulation by The Wall Street Journal:

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Illinois Governor Gives Tax Increases to Placate Democrats Before Deadline

This article appeared online at TheNewAmerican.com on Thursday, June 22, 2017: 

Illinois Governor Bruce Rauner (shown), speaking briefly to a closed session at the state house on Tuesday night, urged “unity” in solving the state’s staggering and rapidly accelerating financial problems. Those present reported afterward that the governor declared, “Failure to act [on his budget proposal] is not an option. Failure to act may cause permanent damage to our state that will take years to overcome.”

The state has already suffered massive damage.

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Gov’t Collects Record $240 Billion in May; Still Runs $88 Billion Deficit

This article appeared online at TheNewAmerican.com on Friday, June 16, 2017:

English: Medicare and Medicaid as % GDP Explan...

Medicare and Medicaid as % GDP Explanation: Eventually, Medicare and Medicaid spending absorbs all federal tax revenue.

The U.S. Treasury announced on Thursday that the federal government collected more money in May than in any other month in history: $240.4 billion. In the same breath, it said that the government spent $328.8 billion, creating a deficit of $88.4 billion.

From a wage earner’s perspective, it meant that in May the average worker paid $1,572 in taxes but the government spent $2,149, making up the $577 difference by borrowing. Such deficit spending is making the S&P Global credit rating agency increasingly nervous.

Just a week earlier, the agency affirmed its best rating — A-1+ — for the government’s “short term” debt, which means, in its own parlance, that the federal government’s ability to pay its current bills is “strong.” But in the longer term, the agency is far less sanguine. While holding its current long-term rating at AA+ (one full notch below its best rating), it said it’s unable to give the United States its highest rating (AAA) because of “high general government debt, relatively short-term-oriented policymaking, and uncertainty about policy formulation” for the future. It explained what it meant about that “uncertainty”:

Some of the [Trump] Administration’s policy proposals appear at odds with policies of the traditional Republican leadership and historical base. That, coupled with lack of cohesion, not just across, but within parties, complicates the ability to effectively and proactively advance legislation in Congress, particularly on fiscal policy. Taken together, we don’t expect a meaningful expansion or reduction of the fiscal deficit over the forecast period.

And what does it say about what’s likely to happen over that “forecast period”?

The U.S.’s net general government debt burden (as a share of GDP) remains twice its 2007 level. While, in our view, debt to GDP should hold fairly steady over the next several years, we expect it to rise thereafter absent measures to raise additional revenue and/or cut nondiscretionary expenditures.

What does that phrase “next several years” mean? How much time before the government’s national debt explodes upward? Says S&P:

Although deficits have declined, net general government debt to GDP remains high at about 80% of GDP. Given our growth forecasts and our expectations that credit conditions will remain subdued, thus keeping real interest rates in check, we expect this ratio to hold fairly steady through 2020. At that point, it could deteriorate more sharply, partly as a result of demographic trends.

Translation: Deficit spending will remain “subdued” for three and a half years, and then Katy bar the door!

Here is where S&P bows out of the picture, giving way instead to the Congressional Budget Office (CBO), which completed the picture in its March report:

Federal debt held by the public, defined as the amount that the federal government borrows from financial markets, has ballooned over the last decade. In 2007, the year the recession began, debt held by the public represented 35 percent of GDP. Just five years later, federal debt held by the public has doubled to 70 percent and is projected to continue rising.

“Continue rising”? By how much? And by when? The CBO is blunt:

Debt has not seen a surge this large since the increase in federal spending during World War II, when debt exceeded 70 percent of GDP. The budget office projects that growing budget deficits will cause the debt to increase sharply over the next three decades, hitting 150 percent of GDP by 2047.

So, that ratio of government debt compared to the country’s economic ability to produce goods and services was 35 percent in 2007, is now 70 percent, and will soon be 150 percent.

And what’s the reason?

The majority of the rise in spending is largely the result of programs like Social Security and Medicare in addition to rising interest rates. For example, Social Security and major health care program spending represented 54 percent of all federal noninterest spending, an increase from the average of 37 percent it has been over the past 50 years.

It appears to be an unstoppable locomotive. Non-discretionary spending (spending already locked into place by past Congresses and fully expected to be received by its beneficiaries) is on autopilot. And interest rates now coming off historic lows are only going to increase those annual deficits into the future as far as the eye can see.

The CBO is about as close as one can get to a truly non-partisan federal agency — one that has no partisan political agenda and is considered by many as the most reliable forecaster of future economic events. So it’s not only willing to cover, analyze, and present its findings candidly, it’s also willing to tell the truth. It asked, rhetorically, “What might the consequences be if current laws remain unchanged?” It answered:

Large and growing federal debt over the coming decades would hurt the economy and constrain future budget policy. The amount of debt that is projected under the extended baseline would reduce national saving and income in the long term; increase the government’s interest costs, putting more pressure on the rest of the budget; limit lawmakers’ ability to respond to unforeseen events; and increase the likelihood of a fiscal crisis, an occurrence in which investors become unwilling to finance a government’s borrowing unless they are compensated with very high interest rates.

Which brings one to the ultimate rhetorical question: What happens when even those “very high interest rates” aren’t enough to compensate those investors for the risks they are taking by loaning their money to a government that increasingly isn’t able to pay its bills and must continue to borrow increasingly massive amounts to cover its deficits? What happens next?

Is Illinois Admitting that it is a “Failed State”?

This article was published by TheMcAlvany Intelligence Advisor on Friday, June 16, 2017:

The Constitution guarantees every state a republican form of government. Other than that it focuses on the legitimate functions of the national or federal government. The states were invited, as most of them did, to adopt similar state constitutions, limiting state powers to providing essential services: courts, police protection and, over time, other services like power, fire protection, roads, and the like.

There are global indexes of failed states, with many of them naming Somalia as the best (worst) example: crime, corruption, short life spans, poor medical help, and wrenching poverty are the rule there. But with its admission that it can no longer pay general contractors to construct its roads, is Illinois becoming a failed state? Those contractors just received this letter from Illinois:

Dear Contractor:

At this time appropriate funding is not available after June 30, 2017. Thus, work shall cease effective June 30, 2017.

Please bring all projects to a condition that will provide a clear and safely traveled way….

On July 1, 2017, all work shall cease except for maintenance … the department will notify you when work may resume.

Right now the state has $14.5 billion in unpaid bills, an increase of nearly $4 billion just since the end of December, with no end in sight. When Republican Governor Bruce Rauner (above) took office in January 2015 he promised he would bring order out of chaos by cutting government spending, and reining in out-of-control pension benefits and excessive teacher and administrative salaries. In brief, he managed to challenge directly state House speaker Michael Madigan, who, along with Democratic majorities in both the House and Senate, has sold out to the teacher unions. When Rauner proposed cutting pension plan contributions, the Supreme Court ruled that he couldn’t – that the state constitution guaranteed that the contracts were inviolable and fully enforceable. That’s when things went downhill. With no possible agreement over state spending – the state has been operating on a pay-as-you-go basis without a budget for nearly three years – unpaid bills began piling up as those contributions had to be paid first and other creditors were forced to take a back seat.

Mathematics and politics are directing Illinois’ future. The math is daunting: with $130 billion in unfunded pension liabilities (which continue to increase despite making the state making the court-required contributions), $14 billion in unpaid bills (and increasing daily), wealthy companies and individuals leaving (Illinois leads the nation in depopulation), property and sales taxes among the highest in the nation, and credit ratings that are eight full notches below the other states in the union, there’s no place to go but down from here.

The state’s inability to rein in its spending has caused a ripple effect, touching the state’s institutions of higher learning. They have been forced to raise tuition and borrow just to stay open and now the credit rating agencies have been busy downgrading their debt issues as well. On June 9, Moody’s Investors Service downgraded seven Illinois universities, with five of them now rated as junk.

As the Illinois Policy Institute noted, the budget stalemate “has led to cuts in state appropriations to Illinois universities. But the universities’ financial difficulties started [long] before the state’s budget gridlock and are largely of their own doing. Illinois colleges and universities have long overspent on bloated bureaucracies and expensive compensation and benefits, prioritizing administrators over students.”

On Wednesday, the president of one of those seven universities just downgraded – Northern Illinois University’s Doug Baker – suddenly announced that he will resign at the end of the month. This followed a bombshell state watchdog report that he and his administrators skirted state bidding requirements by improperly hiring consultants and paying them exorbitant salaries and benefits.

With the millions being poured into the state in support of a Democrat to replace Rauner in 2018, his initial support is melting away. Two-thirds of the populace supported Rauner in 2015, but as of March that support is less than forty percent.

If Rauner is replaced by a Democrat in 2018, then the combination of Democrat policies (and politics) and mathematical inevitability will turn Illinois into a failed state: unable to protect its citizens (see Chicago crime statistics), unable to build and maintain its roads, protecting one class of citizens at the expense of another, and unable to provide education for its citizens or a healthy regulatory climate for small businesses.

If Illinois isn’t a failed state, it will become one shortly. Just ask the general contractors who just received the “Dear Contractor” letter.


Sources:

Illinois Policy Institute: ILLINOIS’ UNPAID BILLS JUMP TO $14.3B

MishTalk.com: Unable to Pay Bills, Illinois Sends “Dear Contractor” Letter Telling Firms to Halt Road Work on July 1

Illinois Policy Institute: MOODY’S DOWNGRADES 7 ILLINOIS UNIVERSITIES, 5 ARE JUNK

Politico: How Illinois became America’s failed state

Heritage.org: Illinois: The Anatomy of a Failed Liberal State

Chicago Tribune: Miller: Illinois in danger of becoming a failed state

Definition of a Failed State

Chicago Tribune: Northern Illinois University president to resign after report alleges mismanagement

 

Illinois Sends “Dear Contractor” Letters Ordering Them to Stop All Road Construction

This article appeared online at TheNewAmerican.com on Thursday, June 15, 2017: 

English: A photograph of the Springfield Capit...

A photograph of the Springfield Capitol Building

Illinois contractors working on the state’s roads just received a “Dear Contractor” letter from the state ordering them to halt work because the state is out of money to pay them:

At this time appropriate funding is not available after June 30, 2017. Thus, work shall cease effective June 30, 2017.

Please bring all projects to a condition that will provide a clear and safely traveled way….

On July 1, 2017, all work shall cease except for maintenance.… The department will notify you when work may resume.

Right now the state has $14.5 billion in unpaid bills, an increase of nearly $4 billion just since the end of December, with no end in sight. When Republican Governor Bruce Rauner took office in January 2015, he promised he would bring order out of chaos by

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Moody’s Revelation: “Managed” Economies fail

This article was published by The McAlvany Intelligence Advisor on Friday, May 26, 2017:  

Perhaps without knowing it, Moody’s downgrade of China one full notch on Wednesday exposed the fallacy of managed economies: that government bureaucrats with fancy degrees from the University of Chicago, Harvard, or Yale know what they’re doing. One of those fallacies that have been promoted for years came from Yale grad Arthur Laffer as far back as the Reagan administration. On the surface it sounds eminently logical: cut taxes and the economy will grow. The fallacy is knowing just how much to cut, whose to cut, when to cut, and how long to cut.

The Laffer Curve undergirds the whole idea of “supply side economics” –

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