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2/3 Think Worst Is Yet to Come for USA

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The Wall Street Journal headline is grim:

Grim Voter Mood Turns Grimmer

Underpinning the gloom: Nearly two-thirds of Americans believe the economy has yet to hit bottom, a sharply higher percentage than the 53% who felt that way in January.

Wow.  I think the barrage of terrible economic news this week has people realizing that you can’t borrow your way out of a debt problem.

So far this fiscal year, the US has paid more in interest on its rapidly rising debt than it’s taken in from all corporate taxes.  That’s just the service on the debt, people.  And interest rates are at all time lows.  From the WSJ.com:

Years of deficit spending by Washington have led to a mounting national debt. Interest payments so far in fiscal 2010 amount to $185.25 billion; by contrast, corporate taxes collected by the government during the same 10 months were $139.71 billion. Interest payments in July alone were $19.9 billion.

The Fed and Treasury officials admit they’re out of options for dealing with economic crisis.  As a nation, we are living paycheck to paycheck.  Yet we’re STILL maxing out every credit card we can get.

Soon, we won’t be able to get more credit cards. Then we’re totally screwed.

Barack Obama inherited a bad situation and made it orders of magnitude worse.  In July, he and the Democrat Congress spent twice as much as they took in.  You can’t make it up in volume, Nancy.

To be honest, I would hate to be a member of the next Congress.  They will face a crisis that few living Americans have ever seen. And it looks like Republicans have a better chance of controlling the House, at least, with each passing headline:

Republicans, meantime, are gaining ground on a number of issues that have traditionally been advantages for Democrats. More Americans now think the GOP would do a better job on the economy—an advantage the party last held briefly in 2004 but has not enjoyed consistently since the mid-1990s. On one of the Democrats’ core issues, Social Security, just 30% now think the party would do a better job than the GOP, compared to 26% who favor the Republicans. That margin was 28 points in 2006.

No matter how you spin it, business is being stifled by two things: debt and taxes. Obama campaigned on raising both. At least he kept that promise.

Now, will the American voter keep alive the promise of America?  We have 83 days to make it happen.

Fed: Other Shoe About to Drop

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The only two people in the world who believe the economy is healthy and vibrant are Barack Obama and Joe Biden. 

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Now, the Federal Reserve Board’s Open Market Committee (FOMC) is getting ready to announce that the economy is sicker than we thought.

Although Fed policymakers still believe the basic trajectory of the economy remains one of moderate expansion, there may be more attention given to heightened dangers of a sharp slowdown. “The FOMC will have to tone down its assessment of the economy in view of recent weak indicators on real growth, real consumption spending and employment,” said Brian Bethune and Nigel Gault, economists at Global Insight.

Last Friday, we got more bad news about the economy, particularly job growth.  The economy still is not adding enough new jobs to keep up with population growth. The 9.5 percent unemployment rate remains that low only because so many people have simply given up finding a job. 

Yet Barack Obama keeps telling audiences that we’re better off than we think we are.

The fact remains that the economy is getting weaker, not stronger.  Consumer confidence is falling, heading toward 12-month lows.  A swarm of bureaucrats and an avalanche of tax hikes are about to hit the country on January 1.  The Obama agenda includes measures intended to hurt businesses and the American consumer.

Obama is right to say that the economy is on track. What he’s not tell you is that the track he’s put it on is one that ends in tears for most Americans.

On November 2, most Americans will elect to switch trains.  A ticket to anywhere is better than Obama’s express to economic hell.

Bi-Partisan Consensus: We’re Screwed

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What if:  In January, a new Republican Congress is sworn in. First up on the agenda? A bi-partisan report stating that Congress must enact the most draconian tax increases and entitlement cuts in history or face total economic collapse.

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That’s the scenario developing.

President Obama appointed a bi-partisan commission to make recommendations about the US government’s debt.  The commission will not report out until after the November 2010 elections, but the leaders—Republican Alan Simpson and Democrat Erskine Bowles–have given some warning about what we can expect. Here are some of the frightening highlights:

  • “This debt is like a cancer” Erskine Bowles
  • Federal revenue—the sum of all taxes and fees— “is completely consumed by three programs: Social Security, Medicare, and Medicaid.”
  • “We cannot grow our way out of this” Erskine Bowles.
  • Neither Bowles nor Simpson is confident that any measures will prove successful
  • "I don’t know that I ever heard a gloomier picture painted that created more hope for me”—Arkansas Governor Mike Beebe
  • Your personal debt obligation—the amount Congress charged to your Social Security Number—is over $47,000 and growing daily. And “you” is every American, born today or 100 years ago.

Among the ideas being tossed around:

  • Reduce or eliminate the home mortgage tax deduction
  • Raise the Social Security age to 70
  • Means tests for Social Security benefits
  • Means tests for Medicare

The irony, of course, is that 100 percent of taxes go to three entitlement programs prohibited by the Constitution. Either we begin a long-term phase out of those programs, or we face a horrific and prolonged depression.  Half the population cannot continue to live off the other half.

What do you think about giving up your home mortgage deduction to pay for wild government spending? Speak out in the comments section.

Don’t Blink (you’ll miss the recovery)

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eyes430x300 The stock market reacted mildly to some devastating economic news today.  In fact, the stock market appears to be in denial about the state of America’s economy. 

Existing home sales fell in May.  As of this morning, economists expected a six percent increase

Economists expect new home sales to be worse than existing home sales.

And economists expected home sales to fall off the table in July and for the remainder of 2010.

But the actual housing market is already worse than economists were thinking. And now over 56 percent of economists expect home prices to fall throughout 2010.

And the bad news keeps pouring in.

Europe is going on a spending and borrowing diet – the sort that tea partyers have advocated for the USA.  But Obama wants to keep on borrowing and spending, borrowing and spending, extorting and bribing.  The contrasting strategies threaten to create a rift in the G20 at a time when unity is pretty important for economic stability.

Obama wrote a letter to his European counterparts on Friday urging them borrow and spend more.  Apparently, he wants the whole world to crash together. Are his projections so ugly that he’s afraid Germany will be bailing out America? 

Cuts in government spending now may cause some short-term pain in the US economy, but continue irrational borrowing will send the US off a cliff into debt slavery. That Obama and his minions no longer bother to argue that point tells me they don’t care about the consequences of their policies. 

See the W? 

What Are We For?

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A few weeks back, the Christian Science Monitor asked me to write an op-ed. The subject was, “If the Tea Party ran America, how would things change; and why do you think you’ll win?”

The call was my opportunity to break from the easy, unassailable position that things are bad and getting worse. It meant coming up with a solution or two.  And solutions already find disagreement somewhere.

For over a year I’ve said that the Tea Party movement, begun out of anger, must shift its energy over time from anger to solutions.  Now, I have no idea the exact shape of these slopes, but I’ve always pictured a graph something like this:

image

By November 2010, when our candidates accept the honor of serving in Congress or state capitols, we better have armed them with solutions to the problems developed over the past decades.

On May 23, the Washington Post carried an op-ed by Senator Bob Bennett. Bennett recently lost his bid to stand for re-election when Utah Tea Partyers targeted him for retirement.  In his op-ed, Senator Bennett correctly challenges Tea Partyers to move beyond negative slogans and to adopt positive reforms.

Their two strongest slogans are “Send a message to Washington” and “Take back America.” I know both very well because they were the main tools used to defeat me in Utah’s Republican convention two weeks ago. They also worked in Kentucky on Tuesday. They are more powerful than most pundits inside the Beltway realize.

More importantly, he points out that, by November or next year, Americans will be ready for sunny optimism again.

We can advance positive ideas, recognize today’s problems, and point to that brighter future all at the same time.  Honestly, that’s what leaders do every day.

No fool would believe that the incoming batch of legislators can solve all the problems generated over fifty years. But we must tackle a few.  I outlined some of the areas for consideration in the CS Monitor piece, but I’d propose just three reforms for the first term: Repeal the healthcare takeover, overhaul the tax code, and set an expiration date on one entitlement program.

Repeal Healthcare Takeover

The first step toward getting out of debt is to stop borrowing money. The easiest way for Washington to stop borrowing money is to stop creating new entitlement programs.

Now, Barack Obama will veto the repeal.  Do it anyway.  The left will claim we have no solution. Let them.  The American people have already decided this, and they came down on our side. The debate is over: ObamaCare lost everywhere except Washington, DC.

The replacement will be to unshackles states from crafting experiments to determine the best solution.  Other states will follow the successful models and shun the failures.  When done at the state level, experimentation works. When Washington experiments, the whole nation is in danger.

Overhaul the Tax Code

The income tax system in the United States is a sham designed to perpetuate itself by breeding succeeding generations of accountants, lawyers, and tax experts who will lobby to sustain an industry.

No more.

We need to begin this overhaul by implementing the system Ronald Reagan and Jack Kemp wanted in the 1970s: A flat tax on earnings above a certain threshold.

I don’t know the exact numbers, but I see the new tax form looking like this:

1040F

As I said, the exempt amount and the percentage are probably not perfect, but the formula works. The exempted amount would be indexed to inflation to that the government has no incentive to allow inflation to raise your taxes.

This is a formula everyone can understand, with the exception of Washington bureaucrats and politicians.

I know many in the Tea Party movement are fans of the Fair Tax, but I am not, and I’ll explain why: the Fair Tax is impossible to explain and easy to attack.

In Pennsylvania’s 12th Congressional District race to fill Jack Murtha’s term, the Tea Party candidate, Tim Burns, was portrayed as supporting the Fair Tax.

Most voters didn’t  “get” the Fair Tax idea until Tim’s opponent, Mark Critz, and the DCCC explained it this way: “Tim Burns wants to impose a 25 percent national sales tax on everything you buy.”

Burns lost, and it wasn’t close.

The Fair Tax might represent a much better solution, both economically and Constitutionally, than the Flat Tax.  But if the Fair Tax gets our best candidates defeated and cannot get through Congress, what good is it?  At present, the Fair Tax is simply too complicated to win broad national support.  It involves too many formulas and rebates and repealing the 16th Amendment.

When we get the votes in Congress to repeal the 16th Amendment, I’ll jump onboard the Fair Tax. But let’s do this one step at a time, okay?  Let’s make things better now, then make them best later.  Let’s not make things worse by demanding perfection on day one.

Under the Flat Tax, taxes will go up for some, down for others.  No one will be punished for achieving more.  The deduction of your first $30,000 is more generous than most combined deductions today.

Additionally, there is not marriage penalty because there are no filing statuses other than “Me.”  You worked or didn’t.  You earned or you didn’t.  I don’t care how many kids you have or whether your home is also your office.

Expire One Entitlement

I don’t care which one, but set a formula for eliminating one of the three big entitlements.  I would start with Social Security, which has not only jeopardized our economic future, it encourages otherwise good people to whine and beg for government handouts.

Social Security is a Ponzi scheme that works only if the next generation is much larger than the current one.  When Americans stopped having 4.5 kids per couple, the cookie began to crumble.

There’s a formula for ending Social Security, but it requires we all pay taxes to fund it until its dead. That’s because Congresses have spent all of the Social Security trust fund—and then some.  The SSA hold numerous notes that must be paid out of general revenue.

That’s okay.  If you borrow money, you have to pay it back sometime. And we’re the ones who borrowed this money by refusing to face this monster earlier.  Fine. Let’s get on with it.

First, anyone drawing Social Security or who’s within 15 years of eligibility will receive payments according to the rules in place today.  So I don’t want to hear from Big Old People that I’m stealing their entitlement.  I am not.

Second, those who have already begun paying into Social Security will have a choice: they can receive a tax-free,  lump sum payment equal to their lifetime contribution without interest, or they can leave the money in the SSA until age 65, then receive a lump sum payment including interest equal to the rate of inflation.  Either way, the FICA withholding—the individual’s and the employer’s—stops.

Third, those fortunate souls who are too young to have opened an SSA account never will.  They simply pocket the 16 percent that currently goes to fund a failing system.

States may want to create their own voluntary or even mandatory retirement scheme.  Fine.  That’s how the federalist system works.  I wouldn’t support a mandated state system, but there’s nothing in the Constitution that would prevent a state from adopting such.  The people of the state could always vote out the legislators who created it.

Solutions

My solutions may not solve all of our problems.  But they will advance four goals of the Tea Party movement:  smaller government, lower taxes, fiscal responsibility, and federalism.

By adopting this list of goals, candidates will move to the right of my chart above, providing solutions instead of just pointing out problems.  Yes, our enemies will throw mud at these ideas: there’s no idea that won’t find critics.

In the end, our mission from day one has been to make America’s future brighter than its brilliant past. We can do that only by moving toward the future we want, not away from the unknowns we’re afraid of.

Please take this poll:

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