Politics or Ideology? Obama's Curious Indifference to Trillion Dollar Deficits

It is official. The CBO in its January 4 press statement (The “Fiscal Cliff” Deal) declared that Congress’s January 1 agreement will “produce (ten year) deficits that are smaller— but only by $0.7 trillion to $0.8 trillion.” Thus we face annual deficits of $920 to $930 billion even, in the unlikely case, that sequestered spending cuts go into effect and Obama Care’s costs come in on target. Continuing as is means trillion dollar deficits as far as the eye can see.

Even five years of trillion dollar deficits are unsustainable: At normal interest rates of 5 percent, almost all personal income tax revenues would go to pay interest, which would exceed expenditures on social security! Only the Fed’s Bernanke’s incessant quantitative easing conceals the mess we are in.

As we barrel down the road to fiscal ruin, Obama shows no interest in reforming the entitlements that are driving the crisis. He demagogues those who propose to control discretionary outlays, and he diverts blame to others: “Everything would be fine if the rich pay their fair share,” he repeats, while knowing the U.S. taxes its rich more heavily than any other country.

Obama’s indifference to the looming debt catastrophe could have two explanations (We rule out that Obama cannot do arithmetic. He claims he “can do the math.”)

go to forbes.com

Republicans Must Play to Win the Long Game

Barack Obama is dead set on an entitlement state of European proportions financed with trillion dollar deficits. When the deficits become unsustainable, he or his successor must either impose massive tax increases on everyone or dismantle Obama’s signal achievement: an “Entitlement America” that guarantees everyone a “decent standard of living.” Obama hopes that when the day of reckoning comes, the American public will be so hooked on entitlements that they will grudgingly accept higher taxes – a questionable proposition.

If Obama had come clean with the American public on his intentions, Mitt Romney would be President of the United States.

Obama won the election by falsely claiming, among other things, that our fiscal problems would be resolved if the rich just paid their fair share. The fiscal cliff skirmish showed otherwise, to no one’s surprise. To cite an influential Obama supporter: “Raising rates on the top 2 percent was never going to be enough anyway.” (I thought taxing the top 2 percent was supposed to solve our problems.)

 go to forbes.com

Republicans Should Walk Away Until Obama Acts as a Grown Up President

Members of Congress have made it a practice to treat the opposition with courtesy and respect even during the most heated of disputes. President Obama took to the airways today to humiliate and degrade the opposition party with untoward politicized remarks. Republicans should simply refuse to deal with him until he learns the decorum of a statesman rather than acting like a Chicago back alley Pol. The Republican Party would be better off as would the country as a whole. There is no need to mince words.

The media complain of a dysfunctional government. They should look closely at its source – a president in constant campaign mode ready to demagogue any issue.

Outsiders, like this writer, are not privy to the fiscal-cliff offers and counter offers that are being circulated, but a general knowledge of the basic numbers and of Obama’s style of negotiating lead me to conclude that the Republicans are being stampeded into an unacceptable deal that raises taxes on top earners by $180 billion between now and 2015 while cancelling almost a half trillion of scheduled spending cuts over the same period.


go to forbes.com

President Obama’s Legacy: $20 Trillion in Deficits for 2016 Victor

The fiscal-cliff negotiations have deteriorated into an embarrassing travesty of competing press conferences, off-the-record remarks,  closed meetings,  and sound bites. The Republican side is frustrated and flabbergasted by the absence of  a concrete proposal from the President  that can be scored by the Congressional Budget Office and then “marked up” by Congress according to standard procedures.  Vague offers of so and so many trillions of revenue increases and spending cuts spread over a decade are just words, not real proposals. 

The last serious fiscal-cliff projections date back to the Congressional Budget Office’s (CBO) August 2012 assessment of the budgetary effects of various fiscal policy alternatives. In its August study, the CBO –  the “gold standard” of budget projections -- calculated the budgetary consequences of going over the fiscal cliff in its “baseline projection.” It then projected the budgetary effects of alternative fiscal policies, among them, extending the Bush tax cuts and shelving the sequestered spending cuts.

We may agree or disagree with the CBO’s projections, but they are the most authoritative we have. President Obama has been vocal with respect to  the fiscal policies he wants, and each item on his wish list can be scored using the CBO’s August study. Therefore, we can approximate the five-year deficits that would result if President Obama gets what he wants. This is not rocket science. Anyone can do this using the CBO’s excel files.

go to forbes.com

We Have Met the Left and It's Obama

“What is motivating (Obama) primarily is ideology. And an ideological opening. He doesn’t like the malefactors of great wealth. He wants to “spread the wealth around.” Peggy Noonan

Anyone who dares to characterize Barack Obama as a leftist radical is heaped with scorn and outrage.  Only crazy, hateful talk-show entertainers like Rush Limbaugh stoop so low, but reasonable people do not listen anyway. Whether Obama harbors socialist views is a valid topic for intellectual conversation, but, other than errant bloggers (Is President Obama Truly a Socialist?), polite people avoid it.

Many moderate Republicans bought into the media narrative that Obama is a centrist, who moves left only to placate his base. Were it not for them, the true Obama would govern from the center, or tilt only ever so slightly to the left.

Indeed,  the carefully scripted Obama masterfully masqueraded as a centrist during his two presidential campaigns, while governing from the left. The complicit media characterized him as a softy, too ready to yield to the obstructionist Republicans.  But if the Left would only “Watch what I do, not what I say,” Obama already delivered for them the moon, and now wants the stars as well.

go to forbes.com

The Liberal Left's Dirty Little Secret: The Middle Class and Poor Pay For the Entitlement State

Europe’s more than half century experience shows that, no matter hard you squeeze them, the rich cannot pay for a big government that guarantees all its citizens “positive rights” to income, employment, health, and retirement. Such an entitlement state – some call it a nanny state -- is funded primarily by repressive taxes on the middle class and the working poor. This conclusion is based on hard statistical facts that neither the right nor left dispute. America’s Left has kept this fact under wraps and out of sight of voters. It should have been the focus of the 2012 Republican campaign, but it was not.

Barack Obama has been busy creating and expanding an American entitlement state that he promises will be paid for by the rich. The middle class and poor need not worry about tax increases.  For the time being, Obama can rely on lenders (and the Fed) to finance the annual $850 deficits projected under the most likely CBO scenario. But the day of reckoning will come.  At some point, the “bond vigilantes” will refuse to finance the deficit at sustainable rates, and the government will be forced to cut entitlement spending or vastly raise taxes.  When that time comes, then ex-President Obama expects the entitlement mentality to be so deeply ingrained that the middle class and working poor will accept their higher taxes with little protest.

If we continue down the road to Obama’s Big Government, everyone watch their wallets. The taxman commeth, big time! Judging from Europe’s experience, we must dramatically raise income taxes on the middle class, triple social security taxes, introduce a 20 percent federal sales tax, and raise the gasoline tax by $4.00.  These taxes are all regressive, which means they fall most heavily first on the poor and then on the middle class.

If you do not believe me, an influential member of the media elite (from the New York Times editorial board, no less), let this secret slip in a remarkably candid admission. (Note his article appeared after the election):

 



go to Forbes.com

The Fiscal Cliff Bargain is Peanuts

The internet and print media are full of accounts of an evolving bargain in the fiscal cliff negotiations. The Republicans will accept $1.2 trillion in tax hikes on the “rich,” and the Democrats will accept $400 billion of spending cuts. (Past experience shows the spending cuts never occur other than for defense). These increases and cuts are to be spread over a ten year period. Annualized, taxes are supposed to increase $120 billion ($.12 trillion) per year and spending cuts by $40 billion ($.04 trillion) per year.

Citizens are supposed to be impressed by figures such as $1.2 trillion or $400 billion. News accounts mention the “over ten years” in passing or not at all.

To see how small these figures are, we apply them to 2012 federal spending and revenues. If this agreement had been in place for 2012 (and had gone as planned), federal revenues would have gone up from $2,468 billion to $2,588 billion. Expenditures would have fallen from $3,795 billion to $3,755 billion. The deficit would have decreased from $1,327 billion to $1,167.

In a word, the fiscal cliff deal yields, at best, small, marginal, and even trivial changes.

In reality, the “rich” will alter their behavior, and tax revenues will rise (if at all) by a fraction of the “agreed upon” change. (Remember Congress can only set rates and rules. It cannot dictate what taxpayers actually pay). As Obama Care’s price tag becomes evident, federal expenditures will exceed expectations, and if interest rates rise, soaring interest payments on the federal debt will send Congress back to the drawing boards.

The fiscal cliff negotiations do not touch the looming disaster of almost $100 trillion in unfunded federal government liabilities under its existing entitlement programs. The Obama administration will leave that problem for the next administration to tackle. The next administration must decide whether to cut the welfare state or tax the middle class at European levels, which requires doubling social security taxes, applying the top marginal rates to the upper middle class, a 20 percent national sales tax, and $10 gasoline.

Such draconic measures will likely prove too much for the next administration and it will try to kick the can down the road to the next administration. Greece: We are not that far behind you unless we get a truly transformational President.

go to forbes.com