Barack Obama told America last night that we're "moving from an era of borrow-and-spend to one where we save and invest."
Yet he proposed a budget that the Congressional Budget Office (CBO) projects will more than double the national debt over the next 10 years from, 40% of GDP today to 82%!
As Peter Ferrara of the Institute for Policy Innovation says:
In fact, there is not one item in Obama's budget that promotes actual saving and investment. Quite to the contrary, the tax rate increases he proposes for the top income tax brackets, for capital gains, and for dividends will all reduce saving and investment.
The budget Obama proposes for this year increases federal spending by a fiscally insane 34% over the budget adopted for last year, with a total of $4 trillion in federal spending, the highest ever. That spending would equal 28.5% of GDP, an increase in the size of the federal government in Obama's first year of 42% compared to the postwar average relative to GDP.
The deficit would reach a $1.845 trillion this year, according to the CBO - the highest ever except for World War II ...
The CBO further estimates that this Obama budget deficit will total an astounding 13.1% of GDP, more than one-eighth of the entire U.S. economy, for the federal deficit alone!
With the national debt over $11 trillion already (the highest in U.S. history), Americans - particularly young Americans - cannot afford Obama's scuzzy math, or as Reason's Matt Welch puts it:
This math ain't just fuzzy, it's bullshit on toast.
In all the talk about bailouts, budgets, and bonuses, the politicians continue to ignore the big, giant elephant in the room ... social security and Medicare. These programs currently put taxpayers on the hook for over $100 trillion (in today's dollars) in unfunded liabilities!
Talk about having disaster written all over it!
But, but ... what about the trust funds and the lock-box? They're myths.
The trust fund is nothing but an accounting gimmick. Congress has already spent every penny ever collected. And the lock-box ... a campaign gimmick by Al Gore. As Allan Sloan points out in his Washington Times column:
How can I say that, given Social Security's $2.3 trillion (and growing) trust fund? It's because the fund owns nothing but Treasury securities. Normally, of course, Treasury securities are the safest thing you can hold in a retirement account. But Social Security's Treasurys won't help cover the program's cash shortfall because Social Security is part of the federal government. Having one arm of the government (Social Security) own IOUs from another arm (the Treasury) doesn't help the government as a whole cover its bills.
Here's why the trust fund has no financial value. Say that Social Security calls the Treasury sometime in 2017 and says it needs to cash in $20 billion of securities to cover benefit checks. The only way for the Treasury to get that money is for the rest of the government to spend $20 billion less than it otherwise would (fat chance!), collect more in taxes (ditto), or borrow $20 billion more (which is what would happen). The spend-less, collect-more, and borrow-more options are exactly what they would be if there were no trust fund. Thus, the trust fund doesn't make it any easier for the government to cover Social Security's cash shortfalls than if there were no trust fund.
How can this be?
Social security is a Ponzi-scheme. To show you how it is a Ponzi-scheme, let's take a look at the argument that it's not. Mitchell Zuckoff, writing for CNNMoney says it's not:
First, in the case of Social Security, no one is being misled. Madoff allegedly falsely claimed to have discovered a "black box" method of earning impressive results, and by doing so enticed individuals and organizations to invest with him. Social Security is exactly what it claims to be: A mandatory transfer payment system under which current workers are taxed on their incomes to pay benefits, with no promises of huge returns.
The first mistake Zuckoff makes is his invocation of "intentions." Remember the old saying, "the road to hell is paved with good intentions?" The financing mechanism of taking payments from one group to pay off the previous group fails because it's mathmatically unsustainable.
Later in his column, Zuckoff debunks this myth of good intentions himself:
Charles Ponzi, for whom the scheme is named, was unencumbered by such high-minded ideals ... convinced himself that he had found a way to make himself and his investors rich using foreign exchange rates and international postage coupons. When he realized that his method wouldn't work, he should have come clean, but instead he tried to find a legitimate way to deliver on his promises, only to bring ruin on many of his investors and himself.
Charles Ponzi's good intentions didn't help him, nor will the federal governments. As far as his claim that "no one is being misled" ... well, tell that to the millions of Americans who believe there's a "trust fund."
The next claim Zuckoff makes is that we'll never run out of new "investors":
Second, Social Security isn't automatically doomed to fail. Played out to its logical conclusion, a Ponzi scheme is unsustainable because the number of potential investors is eventually exhausted ...
But Social Security can be, and has been, tweaked and modified to reflect changes in the size of the taxpaying workforce and the number of beneficiaries. It would take great political will, but the government could change benefit formulas or take other steps, like increasing taxes, to keep the system from failing.
Ahhh ... "the government could change benefit formulas or ... increase taxes," but that isn't the same as claiming social security sustainable, is it? And what does this mean for young Americans?
It means higher payroll taxes!
- When today's college students reach retirement, Social Security alone will require a payroll tax of 16.55 percent, one-third greater than today's rate.
- When Medicare Part A (hospital insurance) is included, the payroll tax burden will rise to 25.25 percent - more than one of every four dollars workers will earn that year.
- If Medicare Parts B and D are included, the burden of Social Security and all of Medicare will climb to 33.6 percent of payroll by 2054 - one in three dollars of taxable payroll, and twice the size of today's payroll tax burden!
It means higher income taxes!
- The lowest marginal tax bracket of 10 percent would have to rise to 26 percent.
- The 25 percent marginal tax bracket would increase to 66 percent.
- The current highest marginal tax bracket (35 percent) would have to rise to 92 percent!
- Additionally, the top corporate income tax rate of 35 percent would have to increase to 92 percent.
Or we could drastically cut the federal budget!
- By 2012, the federal government will stop doing 1 in 10 other things it has been doing.
- By 2020, the federal government will stop doing 1 in 4 things.
- By 2030, about the midpoint of the baby boomer retirement years, the federal government will stop doing about 1 in 2 things.
For more information on this, please see the National Center for Policy Analysis report here.
Zuckoff goes back to intentions again for his third reason why he thinks social security isn't a Ponzi-scheme, saying:
Third, Social Security is morally the polar opposite of a Ponzi scheme and fundamentally different from what Madoff allegedly did.
But "morals" don't change the mechanism. 2+2 always equals 4.
The Bottom-line:
If it walks like a duck and quacks like a duck ... it's a duck. Do you really want to bet your future on it? I didn't think so.
Please take the time to watch the following video by Professor Walter Williams, this is information you've got to know!
Olberman is nothing but a DNC hack, and a pathetic one at that.
And yet the same hue and cry against the admittedly sloppy spending habits of the Bush Administration is eerily absent.
Hey Keith Olberman, all the sudden tired of spewing your spittle into the microphone?