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: Taxmageddon

The Debt Ceiling is the Next Fiscal Cliff

Car off cliff sign

Car off cliff sign (Photo credit: Wikipedia)

Often, the British newspaper Reuters has a more accurate view of American politics than does the distorted, half-blind American media. Their view of what’s next is helpful.

The Republicans are mad that Boehner folded so quickly over the fiscal cliff negotiations and are determined to “get even next time.” That opportunity will present itself in about three weeks.

Technically, the debt ceiling has already been breached, but Treasury Secretary Tim Geithner‘s machinations and accounting tricks are

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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

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Grover Norquist sells out

Grover Norquist - Caricature

Grover Norquist – Caricature (Photo credit: DonkeyHotey)

I really shouldn’t be surprised at this. The Scriptures say not to put my trust in man. But I wanted to believe that, of all people, Norquist – the founder of Americans for Tax Reform,  the creator and promoter of the “Taxpayer Protection Pledge,” and the author of his famous quote: “I’m not in favor of abolishing the government. I just want to shrink it down to the size where we can drown it in the bathtub.” – would be the very last person to back down on his pledge not to vote for any – any – tax increases.

Sorry to disappoint. This is from Newsmax:

Grover Norquist, the influential president of Americans for Tax Reform, said he would support a plan, negotiated by Vice President Joe Biden and House Minority Leader Mitch McConnell, to resolve the fiscal cliff drama.

And the plan?

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“Poison Pill” for Social Security?

According to CNN, one of the sticking points to resolving the fiscal cliff “crisis” is the “poison pill” – better known as the “chained CPI,” to adjust future benefit payouts in response to continued price inflation caused by the Federal Reserve. It’s a simple case of apples and oranges:

The idea behind this is

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Plans to Oust House Speaker Boehner are Taking Shape

Following increasing dissatisfaction with House Speaker John Boehner, staffs of unnamed House members have developed a detailed plan to oust John Boehner (R-Ohio) as the first order of business on Thursday, January 3rd, 2013. Matthew Boyle, writing for Breitbart.com, obtained a copy of the plan with its strategy and tactics laid out in detail. Provided by staffers who demanded anonymity in case the plan backfires, it will be

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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:

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A Tea Party House member doesn’t think there will be a fiscal cliff deal

Tim Huelskamp is a House member (R-Ky.) and a member of the Tea Party Caucus who was canned by Speaker John Boehner because he didn’t “toe” the Republican line, a move that Huelskamp called “petty” and “vindictive.” I called it “instructive” about Boehner.

He has strong opinions about government spending, and wasn’t afraid to voice them. Back in February of this year,

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What if we go over the fiscal cliff? Get ready for a surprise.

Robert Murphy calls himself an anarcho-capitalist which is shorthand for a free market supporter in all things. He is preparing a long article on the impact on government finances if the fiscal cliff is allowed to happen. He gives us a sneak preview of what he has discovered.

He started out using the numbers from the

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It’s not a recession, it’s the weather and the fiscal cliff

Despite ECRI’s prediction that the US is now in recession, Bloomsberg thinks it’s the weather that slowed the economy.  Bloomberg is riffing on the report from MasterCard Advisors SpendingPulse which said that retail sales from October 28th through Christmas Eve

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The “fiscal cliff” is a red herring, says the New York Times. I agree.

The New York Times – whose motto “All the News That’s Fit to Print” has morphed into “All the News That Fits” – is willing from time to time to let a little light shine on taboo subjects, to let something be printed that doesn’t fit their establishment mold, something that conflicts with their primary ideology. It was refreshing to read.

The title is hardly a catcher: “Stabilization Won’t Save Us.” What? How much better would be what Nassim Taleb wrote in his opening paragraph: “The cliff is really just a red herring.”

First, a word about Taleb.  He is the author of the best-selling book, “The Black Swan“, about the impact of random events on society, and how they are more common than people think. He’s also an advisor to the anti-freedom, pro-world-government International Monetary Fund. But, interestingly, he doesn’t appear to be a Keynesian. He is more a realist and, more remarkably still, he is willing to stake his reputation on being outside the mainstream.

He says the fiscal cliff discussion is just so much hot air and persiflage – one of my favorite words that means treating a serious subject with frivolity – in order to hide the real import from being considered:

The fiscal cliff is not really a “cliff”; the entire country won’t fall into the ocean if we hit it. Some automatic tax cuts will expire; the government will be forced to cut some expenditures. The cliff is really just a red herring.

Nor will any “solution” save us from the consequences (being hidden) of decades of deliberate overspending:

Likewise, any last-minute deal to avoid the spending cuts and tax increases scheduled to go into effect on Jan. 1 isn’t likely to save us from economic turmoil. It would merely let us continue the policy mistakes we’ve been making for years, allowing us only to temporarily stabilize the economy rather than address its deep, systemic failures.

I told you it was refreshing!

The “solutions” proposed by Keynesians – whose ideology has gotten us into the mess we’re in – will only make the problem worse:

Stabilization, of course, has long been the economic playbook of the United States government; it has kept interest rates low, shored up banks, purchased bad debts and printed money. But the effect is akin to treating metastatic cancer with painkillers.

He has much more to say, of course, but just this brief “lifting of the corner of the rug” under which our problems have been swept was refreshing.

Finally, some good news: House stops Boehner cave in

It’s nice, once in a while, to wake up to good news. I’ve written that Boehner’s offer to tax millionaires if Obama would just throw him a bone on some promises to cut a little spending was just a sop, a give away, a cave in. And I’m glad to see that unnamed members of the House agreed with me: no thanks, Mr. Speaker, but we’re not going to raise taxes on anyone, just like we promised.

This is the headline that started off my day, from MarketWatch:

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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.

 

 

 

 

Some initial thoughts on the shooting in Connecticut

When I first learned of the shooting, I became angry: angry that such a horrid thing could happen, angry that it gave gun-grabbers another opportunity to wrest essential rights from the rest of us. Then I became frustrated that there is so little I could do, so little I could have done, to prevent such a tragedy.

I have not read anything more than the headlines. I have not read what other people think about the matter. So consider the following

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Establishment Economist fears the Cliff, unless…

Alan Blinder wrote an open letter to Congress at the Wall Street Journal (summarized here if you don’t have a subscription) which proves that smart people can often say dumb things and get paid for it.

First, he’s worried about Republican intransigence that threatens a “deal.” You know that I think a “deal” has already been struck and just the details need to be ironed out. But let’s listen in on what Blinder has to say, to pick up some nuggets about how a Princeton economist with bags full of establishment credentials thinks about the fiscal cliff.:

Congress should work out a deal now to avoid the fiscal cliff, even if it means kicking tough decisions down the road, or it risks tipping the economy into a recession and sending unemployment rates to 11 percent.

That’s the establishment meme:  catastrophe awaits unless something is done! He says that $600 billion will be siphoned out of the economy which “would contract the country’s still-weak gross domestic product and wipe out what little improvements that have taken place in the labor market so far.”

Actually, no. That $600 billion number has been bandied about for so long that it’s taken as fact. The impact of the fiscal cliff is around $600 billion, but some of it is spending cuts. Precious little, unfortunately, around $120 billion or so, but any spending cut, to me, is a good thing. The impact of the Bush tax cuts ending will take about $300 billion (best estimate) out of the economy beyond what Washington is already “siphoning ” off. At present, the government’s revenues from taxes are approximately $200 billion a month. That number would increase, everything else remaining constant, to about $225 billion a month. That’s pretty big, but when compared to an economy that generates about $15 trillion in goods and services every year, it’s almost a rounding error.

But Blinder sticks with his $600 billion number and says that the sky is falling:

If you take between 3 percent and 4 percent of total spending out of an economy, a recession is very likely to follow…

Millions of jobs will be destroyed, incomes and wealth will fall, and businesses will fail in droves — all because a bunch of politicians couldn’t agree.

He also believes the establishment unemployment rate of 8 percent, and then says the fiscal cliff will raise unemployment by 3 percent. That brings him to 11 percent unemployment if nothing is done. Blinder probably doesn’t know that Shadowstats.com even exists, which has consistently shown the real unemployment rate to be above 15 percent.

But Blinder has a plan: raise taxes, raise the debt ceiling, and kick the can:

Compromise should involve raising the debt ceiling now before it approaches anew and agreeing on broad budgetary outlines that avoid the cliff — kicking the can down the road is okay to a degree, provided specifics and filling in the blanks do, in fact, come later…

What’s new here? It’s foolishness all wrapped up inside the establishment envelope of the Journal so it looks believable to the uninformed.

Fiscal cliff impact on the stock market

As noted earlier, I think the Republicans are going to fold and give the president everything he wants: higher taxes on the wealthy, higher taxes on dividends and interest, higher payroll taxes, and eventually they will fold on the debt ceiling as well. Their cover will be extending, probably temporarily, the Bush tax cuts for everyone else.

Having said all of that, and knowing that making political predictions is a highly risky business, I thought Doug Kass’ comments are highly relevant:

Worries [that] the United States will careen over the fiscal cliff and herald in economic and stock-market carnage are just noises and distractions that should be ignored…

Even if a deal isn’t reached or compromise is delayed, taxes on investment income in real terms won’t be widespread since a good deal of investors’ money remains in tax-deferred accounts in the first place.

Those who hold taxable holdings won’t sell and be subject to capital gains and other taxes…

Doug Kass has been kicking around the investment business for years and has built quite a reputation for himself and for his company, Seabreeze Partners. He is often interviewed because of his style and insight.

He thinks the brouhaha over the fiscal cliff is just a show for the rubes: “I would bet that 50 to 75 percent of people who own stocks in this country don’t even know that tax rates are rising.” And because so much of the money is held inside tax-exempt plans like IRAs, 401(k)s, and other pension plans:

I think the impact [on the stock market] will be less than 1 percent, so effectively no impact at all. I don’t believe that either the tax or the fiscal cliff are the cliffs that we should be fretting about…

Less than 1 percent means that the impact of a rise in dividend and capital gains taxes are simply noise.

The Republicans have folded like a cheap suit

The left thinks they have. I think they’re right. Here are headlines from each of the flagship establishment publications: from the New York Times: “Boehner Gains Strong Backing from House Republicans.” And from the Washington Post: “Republicans wave the white flag.”

Of course it’s all about the current negotiations over the fiscal cliff and the frittering away of whatever leverage the House has in an attempt to placate the president as well as the voters who seem to be buying the message that they are the ones standing in the way of a compromise.

The Times makes it sound like a victory for Boehner. One has to be very careful in reading the Times, as always, because a victory from their point of view is a defeat from ours:

As Mr. Boehner digs in for a tense fiscal confrontation with President Obama, the strong embrace from a broad spectrum of the rank and file may empower him as he tries to strike a deal on spending cuts and tax increases that spares the country a recession, without costing Republicans too much in terms of political principle.

It’s fun to parse this paragraph. The “broad spectrum” is meant to read: tax pledge holdouts are either being marginalized or ignored altogether. It’s that strong centrist position, the one of waffle and compromise of principle, where the real work of politics is done. And the writer acknowledges it, too, when she notes “without costing Republicans too much in terms of political principle.” It’s those nasty principles that keep getting in the way of doing a deal.

What’s also interesting is what isn’t said: where is the White House on this? Where are they giving in, where are they violating their principles? Nothing is said about that. It’s all about the caving of the Republicans, moving towards the White House’s position.

Boehner now enjoys support from Eric Cantor, the House majority leader who has signed on to the Boehner bill to raise revenues, and he’s gotten rid of those pesky fiscal conservatives that gummed up the works in various committees. It’s now clear sailing ahead.

Dana Milbank, writing in the Washington Post, was much more direct:

[Boehner] is hoping to lead his fractious GOP to an orderly surrender. The question is no longer whether Republicans will give on taxes; they already have. All that remains to be negotiated is how they will increase taxes, and whether they will do it before or after the government reaches the “fiscal cliff.”

It’s over. Just the details need to be clarified, ratified, and signed into law.

He repeats the same message: the polls support the president, and are blaming the Republicans over the alleged “impasse” in Washington:

A poll by the Pew Research Center found that 53 percent of Americans would blame Republicans for sending the nation off the cliff and only 27 percent would blame Obama.

And so, with the removal of fiscal conservatives and the caving in of other Republicans, the deal is done. One of Boehner’s lieutenants, Rep. Pete Roskam of Illinois (whose Freedom Index is an expectedly weak 64) surrendered:

House Republicans are prepared to get to yes. House Republicans are not prepared to get to foolish, and it is foolish to reject President Obama’s own self-described architecture of $3 in spending cuts for every dollar in new revenue.

Milbank nails it:

Coming from a bunch that liked to say they wouldn’t allow a dollar of new revenue even if it came with $10 in spending cuts, this white flag is as big as a bedsheet.

 

Ron Paul Decries Bipartisan Efforts to Avoid Fiscal Cliff, Predicts Compromise

Texas Republican Representative Ron Paul has, based on his decades of experience watching Washington negotiate and dither, predicted an 11th-hour compromise that will increase government spending and put off hard decisions into the future.

On his website Paul noted:

America faces yet another Congressionally-manufactured crisis which will likely end in yet another 11th hour compromise, resulting in more government growth…

He’s seen it all before:

The hysteria surrounding the January 1 deadline for the Budget Control Act’s spending cuts and expiration of the Bush tax cuts seems all too familiar. Even the language is predictably hysterical: if government reduces planned spending increases by even a tiny amount, the economy will go over a “fiscal cliff.”

This is nonsense.

But it’s being treated as serious business indeed by the power brokers in the House of Representatives and the White House. On December 3rd, House Speaker John Boehner (R-Ohio) sent a letter to the President outlining the Republicans’ plan to avoid the fiscal cliff while criticizing the president’s plan offered last week as containing “very little” that was constructive in reaching a compromise. Regrettably, said Boehner,

That proposal calls for $1.6 trillion in new tax revenues [over ten years], twice the amount you supported during the campaign. [Your] proposal also includes four times as much tax revenue as spending cuts, in stark contrast to the “balanced approach” on which you campaigned…

What’s worse, the modest spending cuts in [your] offer are cancelled out by the additional “stimulus” measures [you] are requesting.

Boehner then countered with his plan to avoid the fiscal cliff, including some changes to Medicare and Medicaid which he says would save $800 billion a year, “hundreds of billions in savings in other mandatory spending”, including reforms to Federal employee compensation and the Supplemental Nutrition Assistance Program (SNAP) – formerly known as the food stamp program.

In addition, he offered “new revenues” which would come, not from higher taxes on the wealthy as demanded by the president, but would instead come from revising the tax code and closing “special interest-loopholes and deductions” while lowering tax rates.

Boehner acknowledged that his plan was just a counter-offer:

This is by no means an adequate long-term solution, as resolving our long-term fiscal crisis will require fundamental entitlement reform [but it is a] fair middle ground that allows us to avert the fiscal cliff without hurting our economy and destroying jobs.

In other words, the Bush tax cuts would stay, Medicare and Medicaid programs would be modified slightly and some loopholes would be closed which would allow the Congressional Budget Office (CBO) to score the Republican plan higher because of its alleged benefit to the economy.

The White House response was nearly immediate. Said White House Communications Director Dan Pfeiffer

 The Republican letter [received] today does not meet the test of balance. Their plan includes nothing new and provides no details on which deductions they would eliminate, which loopholes they will close, or which Medicare savings they would achieve.

He added:

While the president is willing to compromise to get a significant balanced deal and believes that compromise is readily available to Congress, he is not willing to compromise on the principles of fairness and balance that include asking the wealthiest to pay higher rates…

Until the Republicans in Congress are willing to get serious about asking the wealthiest to pay slightly higher tax rates, we won’t be able to achieve a significant balanced approach to reduce our deficit [that] our nation needs.

What this maneuvering has exposed, however, is the first break in the Republicans’ commitment to hold against any increased taxes. The president, still enjoying the euphoria over his reelection and feeling that he can stand firm against a weaker Republican majority in the House, continues to employ the Hegelian Dialectic of letting the Republicans come to his table to negotiate instead of the other way around.

This is a popular tactic which was used by Erskine Bowles, a member of the  deficit-reduction super-committee created in 2010 when he offered a compromise that was “the midpoint of the public offers put forward during the negotiations to demonstrate where I thought a deal could be reached at that time.”

The Wall Street Journal sees the compromise taking shape: a two-step plan whereby a small deficit-reduction package is signed into law – a “down payment” – by the end of the year, and letting the new congress deal with the rest of it in its next session. That down payment would be just enough, according to a GOP aide, to allow the “sequester” of military and discretionary government spending cuts to be postponed or eliminated altogether.

Texas Representative Paul is firm:

Look for a “bipartisan” compromise in late December, with Republicans giving in to tax increases and settling for phony spending cuts that actually grow government, and Democrats caving [in] on defense cuts in exchange for tax increases.

This is how the government has always grown: both sides will sacrifice their pro-liberty, small government stances … in order to grow the government…

 

 

 

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.

“Tax the Rich” and Other Meaningless Catchwords

Government spending

Government spending (Photo credit: 401(K) 2012)

Thomas Sowell has done it again: he has punctured the helium-filled balloons filled with politician’s promises, using words without meaning. Who controls the meaning of words controls the conversation.

First are the words “fiscal cliff.” Peter Schiff had the best explanation: the fiscal cliff is a combination of spending cuts and tax increases which, taken in the aggregate, would cut the annual deficit by $500 billion. Period.

The “tax holiday” is the temporary reduction in payroll taxes funding primarily Social Security. And the debt ceiling is the imaginary limit to government spending that gives politicians the opportunity to promote themselves on TV before voting to raise it.

Sowell first wants to talk about the phrase “tax the rich.” The problem is that it’s all for show:

 Despite all the melodrama about raising taxes on “the rich,” even if that is done it will scarcely make a dent in the government’s financial problems.  Raising the tax rates on everybody in the top two percent will not get enough additional tax revenue to run the government for ten days. (my emphasis)

It’s not about raising revenue at all. It’s about

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I’m Going to Miss Ron Paul

Ron Paul at the 2007 National Right to Life Co...

Ron Paul at the 2007 National Right to Life Convention, held at Crown Center Hyatt Regency in Kansas City, MO; June 15, 2007, (Photo credit: Wikipedia)

Ron Paul has the remarkable knack of pointing out the obvious in a world of planned chaos and confusion. It’s as if he wears night vision goggles.

The fiscal cliff is planned chaos. Congress did it deliberately:

While cutting taxes is always a good idea, setting up a ticking time bomb with a sunset provision, as the Bush tax cuts did, is terrible policy. Congress should have just cut taxes.

That tired old metaphor: kicking the can. The trouble with that strategy is that eventually the can stops rolling and Congress has to kick it again, and again, and again. Paul thinks they’ll kick it once again:

As the year draws to an end, America faces yet another Congressionally-manufactured crisis which will likely end in yet another 11th hour compromise..

The hysteria surrounding the January 1 deadline for the Budget Control Act’s spending cuts and expiration of the Bush tax cuts seems all too familiar. Even the language is predictably hysterical: if government reduces planned spending increases by even a tiny amount, the economy will go over a “fiscal cliff.”  This is nonsense.

What is the best course for Congress to take?

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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.