The Smoke & Mirrors Congress...

Go Ahead, Make …

“Government is the great fiction, through which everybody endeavors to live at the expense of everybody else.” ~ Frederic Bastiat

The classic Bastiat quote on the evils of government couldn’t be more apropos to the present RINOcrats make-up of the current Congress of the United States. In the article coming up from Jon N. Hall in today’s American Thinker, he lays bare the frightening financial prospects and implications of the continuing massive debt that appears to accumulate endlessly without any constraint from anyone in Congress. But first, a commentary or two from some very learned financial minds on what We The People are presently facing from the smoke & mirrors Congress…

Milton Friedman forever declared (paraphrasing his several comments): Money should lubricate society so that people are gainfully employed producing stuff that people want. The free market gets money to the parts of a republic that need lubrication to keep the engine working. When government takes over the function of redistributing the money, some parts go without oil and some get too much. The engine overheats and the system has to be replaced. The people who don’t know how to make their own engines go hungry. Obama and all the modern family kiddies who cry for Progressivism think our problem is that central government does not control enough of the distribution.

I could never understand all the borrowing, spending, and money printing in the United States until I read John T. Flynn’s definition of fascism: “Fascism is (1) a capitalist type of economic organization, (2) in which the government accepts responsibility to make the economic system work at full energy, (3) using the device of state-created purchasing power effected by means of government borrowing and spending.” (He adds more to the definition in “What is Fascism” at Mises.org; to read the whole thing.) By this definition, whether the money is wasted or not is beside the point; what matters is that it is spent. Wendell Berry is also helpful in explaining this point in the Unsettling of America, when he describes our current approach as treating future generations as a colony of the present, who by definition can do nothing to resist the injustice we are perpetrating on them from the smoke & mirrors Congress.

When obama took office “debt to GDP” was 61%, now “debt to GDP” is 106% and rising. Our biggest problem is that every day fewer and fewer people in our country do anything that adds to the GDP. We are headed for either massive hyperinflation or total collapse because the “do nothing” class continues to do nothing and don’t produce anything, It’s just that simple. Simply raising taxes as Obama continues to insist upon, won’t work since, as the Laffer Curve demonstrates, beyond a certain point, government revenue would begin to fall. That is what almost all Leftists fail to grasp, that lower taxes can actually increase government revenue, which was the case of course, in the Reagan years.

But, some hardcore Leftists don’t care since they consider punishing achievers to be more important – as when Obama stated that he would be in favor of increasing taxes even if he knew that government revenue would decline since “spreading the wealth” was more important (i.e., punishing the achievers and rewarding the deadbeats) with a smoke & mirrors Congress.

And with that, on to Jon N. Hall…

On the day that President Obama took office in 2009, the Debt Held by the Public was $6.3T. On January 2, 2015 that debt was in excess of $13T. So during the first six years of the Obama presidency the hard debt of the federal government more than doubled.

One way to look at the immensity of the debt under Obama is this: the number of dollars that the publically-held debt grew by during first six years of the Obama presidency (6.7T) is more than the number of days since the advent of the Big Bang 13.8 billion years ago, which is 5.037T.

The U.S. Treasury would need to collect about $1.33 for each and every day since the Dawn of Time to be able to pay off the hard debt racked up in just the last six years. A buck-thirty-three a day may not strike one as a lot of money, it’s considerably less than what some folks pay for their daily latte, but the payment schedule would be spread out over “eternity.”

It may seem silly to some to be talking about retiring debt over such a period of time, most of which was before life began on this planet, and even before this planet came into existence. But if we were to go back just 10,000 years, a couple of millennia after the end of the last Ice Age, to start paying it off, it would take $67 billion for each of those 100 centuries to completely retire the “Obama debt.”

If we went back 5,000 years to the start of human history, it would take $134B a century. Go back 2,500 years to the start of Western Civilization, and we’re talking $268B a century. Go back 1,250 years to not long after Charles Martel repelled the Mohammedan horde near Tours, France, and the U.S. Treasury would need to collect $536B a century for 12.5 centuries to pay off the “Obama debt.”

We could do this sort of thing all day long, comparing the debt to this or that huge thing, like the number of miles in a light-year, which, at roughly 6T, is less than the number of dollars in the “Obama debt,” but you have things to do and people to see. So let’s find a context that’s more graspable.

To pay off the “Obama debt” in one century, Congress would need to run a surplus of $67 billion each and every year for one hundred years to eliminate the debt rung up in just the last six years. And note that that doesn’t include the $6.3T debt incurred in the 220 years before Obama.

Pres. Obama crowed in his State of the Union address that the deficit has been cut by two-thirds since he took office. But when Obama’s Democrat party controlled both houses of Congress, the deficit never got below a trillion. The deficit was $1.41T in fiscal 2009 and $1.30T in 2011. The lion’s share of the improvement in the deficit came only after Republicans were given control of the House. On Nov. 10, the CBO reported that the deficit for fiscal 2014 would be $483 billion. So if you want to lower the deficit by $817 billion in three years, better vote Republican.

Hyenas Bray Like This…

After the disastrous Pelosi-Reid Congress, Republicans have been given a second chance with control over both houses of Congress. The 2014 deficit the new Congress inherits is larger than any deficit before the Democrats took control of the budget in fiscal 2008. How will Speaker Boehner and Majority Leader McConnell make progress in cutting the deficit with Obama vowing to veto and without a veto-proof majority? To lower the deficit further, the new Republican Congress should not merely rely on an uptick in revenue due to economic growth. Instead, they should cut spending. And a non-controversial way to cut spending is the old standby of “waste, fraud, and abuse.”

In “Waste, Fraud, and Abuse in Federal Spending” last March at Americans for Prosperity, Christine H. Hanson reported: “The federal government spent over $100 billion in taxpayer funds improperly in 2012 — one element of that notorious “waste, fraud, and abuse” in federal spending that we hear so much about.”

In “Why It’s So Hard to Fix Medicare Fraud” on December 25, 2014 in the Wall Street Journal, John Carreyrou and Christopher S. Stewart reported: “Current and former law-enforcement officials estimate that fraud accounts for as much as 10% of Medicare’s yearly spending, or about $58 billion in fiscal 2013. Federal antifraud efforts clawed back $2.86 billion in Medicare funds that year.”

In “Is Federal Spending Too Big to Be Overseen?” on January 13 at the Mercatus Center, Veronique de Rugy and Jason J. Fichtner wrote:

It is worth noting that the government’s figures are only estimates, and there is reason to believe they low-ball the amount of taxpayer dollars lost to fraud and bureaucratic ineffectiveness. For example, three of the largest programs in terms of improper-spending amounts are all health care related. Medicare Fee-for-Service, Medicare Advantage (Part C), and Medicaid combined amounted to $62.2 billion in improper payments in fiscal 2013. Further, Malcolm Sparrow of Harvard University, a recognized expert in health care fraud, argues that federal auditors underestimate the volume of improper payments resulting from fraud. He believes fraud could account for as much as 20 percent of federal health spending, which would considerably increase the improper-payment figure reported by the government. [Italics added.]

The federal government is just too damn big; the right hand doesn’t know what the left hand is doing. The feds misplace billions of dollars and have no idea where it went; they lose billions of dollars they cannot account for. The new Congress needs to go after that, and that’s because to pay for fraud we must go further into debt.

When referring to the federal debt, many do not cite the $13T hard debt that I cited. Instead, they cite the $18T total debt, i.e. the unified-budget debt which includes the so-called “off-budget” “trust funds.” Many also like to throw in the “unfunded liabilities” that some estimate at over $100T.

It seems a fair guess that the feds are not going to pay off the “Obama debt” any time soon. Nor are they going to make much progress in paying down the total hard debt. And forget about the soft debt. About the most that Americans can hope for is that Congress will “freeze” the debt; that is, that they will stop adding to the debt, stop borrowing, and balance the budget. Complicating all this is the need to restore some spending that shouldn’t have been cut, as in the military. But with a balanced budget, we’re still not out of the woods. And that’s because of interest rates. In a fine article at City Journal, Nicole Gelinas quotes former Federal Reserve vice chairman Alan Blinder and concludes:

Raising rates, Blinder cautions, “needs to be done deftly.” Indeed. But if higher interest rates only expose the problems that low interest rates have hidden, even deftness won’t suffice.

What has this $6.7T “Obama debt” bought us? We haven’t restructured the economy; the same structural problems that have been growing for decades still exist. We haven’t gotten tax reform, regulatory reform, nor have we lured many of the businesses that fled America to come back. Our crumbling infrastructure is still crumbling. “Shovel-ready was not as shovel-ready as we expected .”

Obama has been the most expensive U.S. president ever. As to just how unaffordable Obama has been will be discovered soon enough by all those dumb teenagers and twentysomethings who put him in office and who will have to make good on the “Obama debt.”