Wednesday, March 24, 2010

The Moody "Blues"

No, this is not a blog about one of my favorite 60's rock bands.

The national debt and uncontrolled spending in Washington is one of the least understood and at the same time the most serious issue affecting every American today. But why should you worry about the country's debt as long as you get:
your social security payment;
or your Medicare subsidy;
or your welfare payment;
or your food stamps;
or your free government housing;
or your children get their free school lunches;
or you get your free "stimulus" check from the government;
or you get subsidized for your college education;
or cash back from the government if you buy a car;
or cash from the government to buy a home;
or two years of unemployment benefits;
or cash from the government to help pay the mortgage you cannot support;
and soon a government subsidy to help you buy health insurance ?

How can anyone criticize such a compassionate and "giving" government? As one Detroit recipient responded when asked where she got her free stimulus check; "Obama give it to me, from his stash". Unfortunately, I have news for Obama and his Administration - "THE GOVERNMENT 'STASH' IS GONE".

As a result we are about to get the "Moody Blues". Most Americans have never heard of Moody's Investors Service. Moody's are the world-wide recognized authority in bond ratings. In layman's terms when a country, or a state, or a company sells bonds to finance their debt, Moody's rates the risk of those bonds being paid back. Throughout history the USA has had a gold-plated credit rating of AAA for their Treasury Bonds. But in a recent report Moody's made some interesting comments:

Regarding our AAA bond rating they said: "The rating is 'stable', but the 'distance-to-downgrade' has substantially diminished". In layman's terms, for the first time ever the USA is getting closer to having their Treasury Bonds downgraded. Why is this a problem? Because if Moody's reduces our bond rating we will pay higher interest rates to finance our staggering debt. And this higher interest rate will affect all aspects of our economy and could drive us into another recession, or worse.

In analyzing our massive debt burden, Moody's also made another interesting statement: "Growth alone will not resolve the USA's increasingly complicated debt equation. Maintaining a AAA bond rating will invariably require fiscal adjustments of a magnitude that in some cases will test social cohesion". In layman's terms Moody's are predicting that we will not be able to "grow" our way out of this massive debt problem - meaning spending cuts and higher taxes could be so severe that it could result in "public unrest".

Could we be seeing riots like they are having in Greece...citizens upset because they cannot get their welfare, or food stamps, or pension payments? Or upset because Obama has had to break his promise of, "no new taxes on the middle class"?

My parents always told me: "There is no such thing as a free lunch"...and if Moody's are accurate in their predictions, Obama's free lunches will soon start to disappear and if he truly is the Messiah he will have to start "feeding" the multitudes from an empty pot.

Sunday, March 21, 2010

The "Statist" revealed?

When Obama was running for president many of his opponents called him a "Statist" because of his long associations with many left wing radicals and associations, and his past socialist views. But Obama's campaign attributed these accusations to the right wing and convinced the American voters that he was a "centrist" and would pull this country together.

What is a "Statist"?
Wikipedia defines Statism as an ideology that advocates the use of government to achieve goals both economic and social. Economic statism promotes the ideology that the government should play a major role in directing the economy by heavy regulation or by government running major segments of industry (such as owning the country's auto industry). Social or political statism promotes the ideology that individual freedoms and rights are less important than the right of the government to"level the playing field" and insure that all citizens share equally in the productivity of the state - i.e. "redistribution of income". Historically, the classic examples of statism were the societies of Nazi Germany and the communist Soviet Union where the central government controlled every aspect of individual life.

I will not call Obama a "Statist" but look at what has happened since his administration was elected:

1/ The government bailed out many of the major banks and now owns or controls much of the financial industry. Government owned Fannie Mae and Freddy Mac control more than 50% of the mortgage market and many say are responsible for the housing "meltdown" by issuing mortgages to tens of thousands of unqualified buyers who eventually defaulted. Both of these government owned mortgage companies continue to lose massive amounts of money, yet are bailed out annually with taxpayer money.

2/ The government bailed out the failing auto industry and now along with the auto unions owns two of the three US auto companies.

3/ The 700 billion dollar stimulus program has resulted in few new private sector jobs but an increase of thousands of new government jobs. Government unemployment stands at half that of the private sector.

4/ The expansion of unemployment and welfare programs during the past year has been unprecedented resulting in many more citizens relying on the government for support, and has contributed toward pushing the national debt to the precipice.

5/ This new Health Care Bill gives the government unprecedented control over most aspects of the medical profession and in the opinion of many experts is just the first step toward elimination of private health care. The "statist" believes in "single payer" nationalized health care with government controlling all aspects of the medical industry. It is estimated that the government will need to hire 16,000 new IRS agents just to administer the mandates in this new bill.

6/ In addition, hidden in this Health Care bill is a complete government takeover of the College Student Loan Program which up to now has been administered by private companies.

7/ And finally, one of the next items on Obama's agenda is "Cap and Trade" - government regulation of carbon emissions, which could result in complete control of the energy industry and it's affect on each of our lives.

Is Obama a "Statist" - you make the call.

Saturday, March 20, 2010

It's not "sausage"

Pundits refer to this health care madness as "making sausage" because the bill includes so many special earmarks, new rules, and backroom deals; many of which have nothing to do with health care. Believe it or not the final bill even includes a government takeover of the Student College Loan Program...health care?

Even though a majority of Americans are in favor of health care reform, that same majority are against this bill as it is written. It appears the bill could become law this weekend and possibly with a margin of just one Democratic vote changing one fifth of the economy of this country; and it will give government more control over our lives than any time in history.

Because of the financial "trickery" being used to present this bill to the American public, I don't call this sausage, I call it a sweet cookie with a poison pill inside. Many of the good aspects of this bill are "front loaded" while the negative aspects are delayed until after Obama's first term as president.

1/The democrats are "giddy" because the CBO reports that the bill will reduce the deficit over one hundred billion dollars the first ten years. They do not tell us that this deficit projection includes ten years of taxes but only six years of benefits since most of the plan costs do not start until 2014 - part of the "sweet cookie".

2/Mandatory coverage for pre-existing conditions begins immediately for children, and parents will be able to carry "children" on their own policy until those children are 26 years old. Both sides are in favor of this part of the bill - part of the sweet cookie.

3/Income taxes on individuals earning over $200,000 or couples earning over $250,000 go to 44% under this bill; not including state or local income taxes. These are "Jimmy Carter" tax rates and if you were alive during that period you can remember what happened to the economy. Since most of the beneficiaries of this new entitlement are lower income people or people who rely on the government to take care of them (and are probably Democratic votes), this is also part of the sweet cookie. But since most of these high income people are small business owners who create jobs, the future effect on the economy could be disastrous.

There are many other provisions in this bill that are part of the sweet cookie but in 2014 the "poison pill" will be reached as the costs start up and some economists predict the national debt will then explode. If you add that to our existing debt this country could be heading for bankruptcy or massive taxes on EVERYONE, not just the "fat cats". Then we will get a close up look at what out-of-control entitlements can do to an economy. It is easy to "sell" another entitlement - after all, everyone wants something for free. It is another thing to pay for those entitlements.

There is an old adage proven throughout history; "When people who are taking out of a society outnumber those that are putting in, that society collapses". This new Health Care entitlement along with our bankrupt Medicare and Social Security programs could be taking us to the edge of that cliff.

Tuesday, March 2, 2010

Obama fatigue

Is anyone besides me sick of seeing Obama on television EVERY day making a speech? This narcissistic orator believes all he has to do is stand up, turn on his golden voice and all the country's problems will get better. On the contrary, the more he spews his line of BS the more this country continues down the wrong path.

The financial madness in Washington is beyond anything I have seen in my lifetime and the spending just seems to continue with the national debt approaching $13 trillion. Who will pay the bill? Obama says that only people making over $250,000 will see their taxes increase. In one of his latest blustering homilies he informed us that a "Commission" has been formed to come up with recommendations on how to reduce the out-of-control national debt. The reason for this Commission confused me so I decided to go back and read again that document that our President and Congress seems to have forgotten about - the US Constitution.

The constitution states that; "the Congress shall have the power to borrow money, collect taxes, and pay the country's debts". We elect 435 Representatives and 100 Senators to manage the country's finances; supposedly our best and brightest people. Then why do we need a special Commission to tell them how to do their job? I'll tell you why - FOR POLITICAL COVER.

There is no way our national debt can be reduced without drastically reducing spending or increasing taxes on everyone. But Obama has promised that "No one under income levels of $250K will see their taxes go up one dime". Since the government is the only part of this economy growing and with Democrats in charge, do not expect to see any significant spending cuts. I predict that this Commission of 10 Democrats and 8 Republicans will recommend tax increases on everyone in the form of a "Value Added Tax (VAT)"...similar to what they do in Europe. And Obama will respond by making another speech and telling the American public; "I promised not to raise taxes, but I must follow the recommendations of this Commission". He will do this to hopefully get him, his administration, and Congress off the hook - it won't work.

I predict a VAT is on the horizon folks, probably 5-10% on top of everything you buy...in addition to state and local sales taxes. Ironically this will have the most damaging effect on the poorer citizens of this country; the citizens that the Democrats claim to protect the most. And the effect on the overall US economy could be disastrous.

VAT - watch for it.