by | ARTICLES, BLOG, BUSINESS, ECONOMY, FREEDOM, GOVERNMENT, OBAMA, POLITICS, TAXES
Everyone knows that Greece is so far in debt that it is actually impossible for them to ever repay it all. France, Spain, Portugal, Italy, and most of the rest of the EU is not much better. Even worse than Greece is Japan’s debt; at over 200% of GDP — and growing — it seems hopeless, despite some reputable economists thoughts that since a large portion of the debt is owed by one branch of their government to another, it is somehow not all that bad.
The U.S. debt is now $18 trillion and still growing at a rate higher than it ever was before Obama took office (Obama and Democrat protestations being wrong). We recently issued $1 trillion in new debt just to pay off old debt, despite bringing in record revenues. And when unfunded promises to pay for Social Security and Medicare benefits are factored into our liabilities, this debt becomes more than $100 trillion – an amount that has no more likelihood of being paid than Greece’s debt.
Yet all of these countries are fighting over the same issue. Every country knows that its debt was honorably borrowed, and needs to be repaid. One would think that, like an individual or family that incurred too much debt, government spending needs to be reduced to below the level of income, with the excess going to pay down debt. A program to stabilize must present itself as fiscally sustainable so businesses, citizens, and creditors can have renewed confidence.
But the Keynesian mentality – which would argue that such austerity measures would contract the size of the economy, thereby making it even more difficult to pay down debt – is unfortunately winning the day.
I do not believe that many honorable and intelligent people actually believe in this Keynesianism. It is just so much easier politically to tell your constituents that government handouts don’t need to be cut — because in doing so, you risk losing reelection. And populist leaders have a great time casting their (responsible) opponents as scrooges, taking advantage of the lesser educated and poorer individuals who will ultimately be hurt most by these irresponsible, spendthrift policies.
Why do I believe that the Keynesian theory is wrong? Not because of some sophisticated economic theory, but rather some simple history and logic, in no particular order:
1) Government spending wholeheartedly crowds out private spending, substituting inefficient political and crony-based spending for free-market, give-the-public-what-they want spending.
2) After World War II, government spending (military, etc.) dried up overnight. But a free-market, non-coercive environment at the time, allowed private investment to flourish and more than make up for the decline in government spending.
3) The outrageous level of U.S. spending in the last six years has resulted in the poorest recovery since the New Deal; FDR’s meddling only prolonged America’s anemic recovery. But the current sluggish economy should not be surprising either, since Obama’s policies are taken directly from FDR – raising taxes, bad mouthing as well as over-regulating businesses, giving organized labor excessive power, instituting policies that discourage people from working, and hurting international trade.
4) There is no evidence, in the last 50 years, that Keynesian theory worked in the real world. On the contrary, one need not look too far to Northern Europe vs Southern Europe — Latvia compared to Greece — to see the results of strict austerity measures vs fiscal tepidness, and each government’s current level of sustainability. Keynes fails wholeheartedly.
The bottom line is, if you borrow money, you have to pay it back. Just because you irresponsibly spent the money does not give you an out. Just because you can think of reasons to delay repayment, doesn’t mean that you should. Just because you are a government doesn’t mean you are exempt from your fiduciary responsibilities. Historically, the only countries to get their debt under control have been those that have cut spending.
Get spending under control and start paying down the national debt!
by | ARTICLES, BUSINESS, ECONOMY, GOVERNMENT, OBAMA, POLITICS, RETIREMENT, TAXES
The Wall Street Journal unveiled the existence of a new investment plan that was created without Congressional approval. To be fair, we first heard about it during last years State of the Union address in January, 2014; Obama announced that he would instruct the Treasury to craft a new retirement plan, which the WSJ noted “was puzzling because such plans are normally created by law, not Presidential order”
Sure enough, Obama kept his word. It’s called “myRA”, and it is a retirement plan that invests solely in government debt. Here’s more:
“A form of Roth Individual Retirement Account that allows people to save after-tax dollars and watch them grow tax-free until retirement, the new myRA offers a single investment option. It’s a private version of the G Fund that is available to federal workers and has lately been delivering annual returns of about 2% on its portfolio of Treasury securities.
Intended for those who haven’t started saving for retirement, don’t have a retirement plan at work, and make less than $129,000 per year ($191,000 for married couples filing jointly), the myRA requires no minimum investment to open an account and promises no fees for investors.”
There are no other investments except in Treasury bonds. No stocks, no corporate bonds. Just Treasury bonds. And the Treasury department is funding the program.
The WSJ confirmed that the Treasury Department didn’t actually receive any authority to start his program. Instead, it is using the budget from the “Bureau of the Fiscal Service” to do so. “The assertion here is that existing law allows this part of the Treasury to hire financial agents as part of its mission to efficiently finance the federal government.” In order to manage the new program, the Treasury hired a group called Comerica and its partner, “Fidelity National Information Services”.
The WSJ raises some good questions pertaining to the existence of the program, its purpose, and its funding:
“[F]ar from delivering efficiencies for the taxpayer, this program is designed to subsidize the investors. Not that a low-yielding Treasury securities fund is the right move for these first-time investors. But this is a deal they cannot find in the marketplace because it would be unprofitable for any company to offer it, given that the investor pays no fees and can contribute as little as he wishes in regular payroll deductions. Taxpayers are covering the costs, though their elected representatives in Congress never voted to create the program. So far Treasury also hasn’t told us the fees it is paying Comerica.
The subsidies in myRAs are likely to be small at first, but the history of government programs is that they expand over time. And if such a subsidy scheme can be enacted administratively, does anyone think this will be the last time such power is exercised?
New investors should be encouraged to consider ways to build wealth beyond simply lending money to the feds. And if politicians want taxpayers to support another retirement program, they should do so through law, not White House whim.”
You can read more about myRA by going to the Treasury page. myRA is touted as “a simple, safe and affordable retirement account created by the United States Department of the Treasury for the millions of Americans who face barriers to saving for retirement.”
All this program seems to do is create another fund that is guaranteed by taxpayers, whose accounts invest in a government program — the Treasury Bond — essentially acting like a prop. How much it will cost the taxpayers remains to be seen.
by | ARTICLES, ECONOMY, ELECTIONS, FREEDOM, GOVERNMENT, HYPOCRISY, OBAMA, OBAMACARE, POLITICS, TAXES
The Daily Caller did a great job uncovering more of the information surrounding the writing and passage of Obamacare. Going back to 2009, the chief architect of Obamacare, Jonathan Gruber, made two very specific points about the bill: 1) it is unaffordable because there are no cost controls; 2) in order to control costs, treatment would have to be denied.
Below are highlights from the 2009 policy brief:
* “The problem is it starts to go hand in hand with the mandate; you can’t mandate insurance that’s not affordable. This is going to be a major issue.”
* “So what’s different this time? Why are we closer than we’ve ever been before? Because there are no cost controls in these proposals. Because this bill’s about coverage. Which is good! Why should we hold 48 million uninsured people hostage to the fact that we don’t yet know how to control costs in a politically acceptable way? Let’s get the people covered and then let’s do cost control.”
* “The real substance of cost control is all about a single thing: telling patients they can’t have something they want. It’s about telling patients, ‘That surgery doesn’t do any good, so if you want it you have to pay the full cost.’”
* “There’s no reason the American health care system can’t be, ‘You can have whatever you want, you just have to pay for it.’ That’s what we do in other walks of life. We don’t say everyone has to have a large screen TV. If you want a large screen TV, you have to pay for it. Basically the notion would be to move to a level where everyone has a solid basic insurance level of coverage. Above that people pay on their own, without tax-subsidized dollars, to buy a higher level of coverage.”
However, what the American public was told by Obama is that Obamacare would lower the cost of insurance by $2500. Now we know, even more than ever, that we were told whatever was necessary in order to make the bill palatable enough to eke out passage in Congress despite protestations from much of around the country.
You can read the entire policy brief here.
For more on Jonathan Gruber and Obamacare, go here
How “Obamacare Was Sold on a Pack of Lies”, go here
