Different Perspectives, But a Similar Picture

One reason I keep tabs on information sources that run the gamut from totally mainstream to totally off-the-grid is to try and get a more well-rounded perspective on what is happening in the world. That said, there are some issues where contrasting vantage points paint a similar picture.

Take, for example, some recent commentary on our nation's fiscal situation.

Here is what The Economist reported in its latest Daily Chart feature, "I O USA":

America's government has little to say about tackling the budget deficit

Ever since the Democrats' poor showing in the mid-terms, the two parties have been engaged in a rather stiff dance. Both sides talk about cutting the deficit but are unwilling to risk losing voters by trimming the big budget items: pensions, Medicare, Medicaid and defence. Republicans, who were initially pushed to talk tough on cutting spending by the Tea Partiers, have backed away from what plans they had to take on entitlements since gaining control of the House. Meanwhile the White House appears to reason that making the running on cutting entitlements is a political loser, hence the lack of a medium or long-term vision for America's finances in the president's Budget Request, which was delivered to Congress this week with a complementary set of over-optimistic forecasts.

And here's what Gonzalo Lira wrote (with a bit less British reserve) in "'We Owe How Much?': Waiting for The Big Splatter":

These defict numbers are huge. Huge. HUGE.

There's also the little issue of the debts that have already been racked up as a result of prior profligacy.

As of January 2011, the U.S. Treasury had $8.965 trillion in outstanding securities, plus an additional $5.166 trillion in “non-marketable” securities—that is, intra-government debts. The total outstanding debt of the U.S. Federal government is $14.131 trillion.

The U.S.’s gross domestic product in 2009 was $14.29 trillion.

So this current deficit is over 11.5% of 2009 GDP. Even if we take Office of Management and Budget (OMB) rosy predictions for 2010’s GDP, the deficit is still 10.9% of GDP.

As to the rolling debt? It’s just about 100% of GDP.

These are Third World numbers: Deficits that are in the double-digits vis à vis the gross domestic product—and total debts that equal tha GDP—are numbers that Argentina—Greece—Zambia gets:

These numbers aren’t supposed to happen to the good ol’ U.S. of A.!

Oh, but they are happening.

Coupled to those terrible numbers, the Federal Reserve is monetizing the Federal government’s debt—that is, printing money, in order to help the government pay its bills. There’s really no other way to look at it. As I wrote here (when the deficit was still projected at only $1.267 trillion), the Fed is monetizing 50% of the FY 2011 deficit, and buying up an additional 10% with excedents through QE-lite.

With the new numbers, that proportion of what the Fed is buying for FY 2011 is diminishing, to 47% of the deficit, of which 37.5% is outright monetization.

But this is like fiscal heroin: It’s clear to anyone that the Federal government cannot continue to function without the Federal Reserve’s ongoing purchases of Treasury bonds by way of Quantitative Easing 2. With the 10-year at 2.5% interest, there would simply be no demand for Treasury debt, if the Federal Reserve cut off the Federal government—and the Fed knows this.

So the Federal Reserve will have to continue monetizing the Federal government debt, with no end in sight—it really has no choice: If it doesn’t, interest rates will rise so high so fast, that the Federal government would simply go broke. So when QE-2 expires in June, it’ll be extended: Quietly, and without fuss.

Again, this is a Third World policy: Deficit funding that nakedly depends on the central bank printing up and buying close to half of the new issuance of debt.

And on top of everything, this budget deficit is for a budget that has yet to be passed! After all, the fiscal year 2011 budget has not been passed, the government operating since October 1, 2010, under continuing resolutions. The latest extension runs out on March 4—when presumably the budget has to be passed this time—for sure! . . . maybe.

No matter how you put it, one thing seems clear: this is not going to end well

Comments

[Martie]

It's worse than he says. See http://www.federalreserve.gov/releases/h41/ for the amount of treasuries they've been buying. Over the last 4 weeks, their treasury holdings have increased at a rate of about $1.4 Trillion per year. So they are pretty much completely monetizing the deficit. I guess no one else wants to buy (and hold) the treasuries.

[George Fleming]

"...the big budget items: pensions..." says the Economist. If they mean Social Security, even I know that SS is not a budget item. It is funded by the workers themselves. It is a retirement program, not a tax. It does not contribute to the national debt. In fact, since Reagan starting taking money from the SS Trust fund, that money has been supporting the US government, that is the rich, by reducing their taxes.

But the kleptocracy wants us to believe that SS is one big reason the country is going to ruin. Why? One reason is that they want to privatize SS so that they can rake off huge profits. Also, they want people to think that the people who get it are shiftless and lazy:

"Well, if you look at the debate that’s going on—you know, you read New York Times, anybody—they say the big problem is entitlements. Entitlements means Social Security, Medicare and Medicaid. Well, Social Security is just pure lies. I mean, Social Security doesn’t even add to the deficit. It’s funded by payroll taxes. And furthermore, it’s in quite good shape for decades. So that’s just mentioned in order to try to destroy Social Security. Social Security does nothing for the wealthy. It’s a means of survival for working people and poorer people, so therefore let’s get rid of it. Also, Social Security is dangerous. Social Security is based on a principle which is frightening: namely, we care about each other. So, Social Security is based on the idea that you care if a disabled widow across town has food to eat, and you have to drive that out of people’s heads. They’re supposed to care only about themselves, not anybody else, like part of the reason for attacking unions. So you’ve got to get rid of Social Security, so therefore lie about it...
http://www.energybulletin.net/media/2011-02-18/%E2%80%9Cdemocracy-uprising%E2%80%9D-usa

If the editors of The Economist or anyone else spreads this lie, there is no reason to believe anything they say.

[Libertarian jerry]

AMERICA IS BANKRUPT.....It was planned that way by the Elites behind the scenes,in order to bring America to its knees,destroy its sovereignty and its Constitution and then fold the country into a One World Socialist system run out of the U.N.,with the elites behind the curtain pulling the strings of power. The reasons for the bankruptcy are obvious.1. Government ,on all levels Local,State and Federal,takes over 60% of the country's GDP. On the Federal level 90% or more of the money is spent on foreign boondoggle wars and Ponzi Schemes like Social Security and Medicare.2.Add to these a crushing Debt service and its easy to see why America is broke.The basic philosophy that it is up to the government to solve social/economic problems has been a disaster for America. This collectivist philosophy has turned a nation of once proud and self reliant people into a nation of indebted dependent serfs.

[Carlos]

Social Security has it's own funding source, and as George explains above it was looted to mask decreasing taxes on the elites.
Starting with LBJ and Vietnam, foreign wars and the MIC have bankrupted this country more than anything else.
The best sicentists have spent their careers planning bigger and better ways to kill everyone on the planet
instead of on advanced technology in consumer and capital goods.
All we have to show for the MIC is huge debts, huge military pension obligations, tens of thousands of maimed soldiers, a state security service like the Gestapo, and a world that increasingly views us a war criminals.
And Congress will not change a thing until a collapsing currency forces their hand.
We are well and truly doomed.

[Lets gang up on the weakest.....they don't fight back!]

@Jerry...its always the oldest, the poorest, the weakest that are the source of our problems with guys like you....the system would work .....its the greed and pilfering that kill it....I'm sure this guy is one of many!

Ex-Leader of Charity for Disabled Gets 10 Years in Prison, Must Pay $65 Million

Yesterday, a judge sentenced the former CEO [1] of an El Paso charity to 10 years in prison and $65 million in restitution for corruption and embezzlement involving the federal government’s biggest jobs program for the disabled.

The sentence is the result of a federal probe launched after a 2006 investigation by reporters Les Zaitz, Jeff Kosseff, Byan Denson and photographer Faith Cathcart at The (Portland) Oregonian. Examining charities that hired the disabled nationwide, they found non-profit executives were cashing in huge paychecks [2] while their disabled workers made pennies an hour.

http://www.propublica.org/article/ex-leader-of-charity-for-disabled-gets-10-years-in-prison-must-pay-65-milli

[droubal]

Actually, Social Security isn't able to pay all its obligations anymore. It went into deficit this year. The excess payments that were going into the Trust Fund were spent, so that money is no longer there to pay benefits. To redeem those bonds, money has to come from general funds to provide that cash. Problem is, general funds is running $1.65 trillion in deficit this year. No money for anything, including Social Security.
Adding to the problem is the acceleration of retiring baby boomers. Something like 7000 per day starting to take benefits, so obligations will rise quite fast.

Medicare is in worse shape. It will have bigger outlays but the payroll taxes are smaller to fund it.

[roger]

The rugged individualist,the pioneers
who made up the wagon trains,banded together
for mutual assistance, and attitude that is
sadly missing in modern day America

[Blurtman]

Default on the debt already.

[Libertarian jerry]

Social Security is a fraud. Its a Tax masquerading as a retirement scheme. If you go back to the 1930s when Social Security was declared Constitutional (The Helvering decision), It was only declared Constitutional because it was a an Income Tax called Social Security "contributions" and the funds were dealt out as Welfare Checks. Yes, when you go on Social Security your going on Welfare. Legally Social Security taxpayers have no equitable interests in any fund. In fact if Social Security was ended tomorrow,the people paying into it would have no legal recourse for obtaining any rebate on funds paid(see Fleming v Nestor). Also having a Social Security number is voluntary(although it is very difficult to operate in today's world with out that number). If,in the last 100 years,there was no military and no wars,still, with Social Security,Medicare and Medicaid plus interest on the National debt America would be bankrupt. You can't have a system where people put in a nickle and take out a dollar and accept anything but bankruptcy. To lay guilt trips on the messengers who tell you the truth about the fraud that is Social Security is totally wrong. Social Security and Medicare and Medicaid should be phased out over the next 30 years or so,.This way the people who depend on it will not have the rug pulled out from under them. The government has no business sticking their noses into some ones retirement or Health Insurance. Only individuals,families and charities should be involved. America would be a better place for it.

[roger]

Different Perspectives,one reality.
The debt cannot and will not be repaid,
energy shock is in the making,
food prices are sky rocketing,
Austerity measures or dollar printing
only make things worst.

[George Fleming]

Maybe droubel believes what he wrote, so I can't say that he is spreading the SS lie intentionally. He is just wrong. SS can pay out the full amount promised for about 27 more years - IF the government pays back what it "borrowed" from the trust fund. After 27 years, SS can pay about 78% of what was promised, even if we do nothing. With some slight adjustments it could pay 100% after 27 years and thereafter. But the kleptocracy is destroying this country so fast, we will be lucky to last another 27 months. Thanks a lot, R. Reagan.

[roger]

If we could turn back the clock and reinstate
the family farm,the family retail shop,the family
factory,then yes each family is responsible
for it's own.. But this is a world transformed
into mega corporation,automated factories,
mega industrial farming and mega system of
delivery or transportation and billions of self
supporting individuals have been transformed into
laborers who have no means to reproduce themselves.
Talk of dismantling social programs is pure madness
and can only end in bloodshed and barbarism.

[sharonsj]

Social Security can be immediately fixed by raising the cap so that earners making over $108,000 will pay into the system.

Meanwhile, isn't it ironic that the Rethuglicans insisted on keeping the Bush tax cuts that haven't created any jobs and which raised the deficit they complain about. And then to make up for it, they cut funding to abused women's shelters and home heating for the poor. But since when did the Big Boner care about anybody who couldn't bribe him?

Congress should start by cutting back on their own entitlements. Anyone who is in Congress for 5 years can get a full pension at age 62. You and I have to work for 45 years to get Social Security and if you retire at age 62 you forfeit 25% of what was due you.

[Don Levit]

Droubal is correct that the surplus FICA taxes were spent on current government expenses over all these years. Those dollars are gone. I think everyone agrees with this point.
The interest paid to the SS trust fund is paid in Treasury securities, debt.
So, the only way to access the trust fund is by starting over, and tapping the general fund (and debt).
The trust fund makes it no easier to pay beneficiaries than if the trust fund didn't exist.
For, if the trust fund didn't exist, how would the beneficiaries be paid - in the same way, by tapping the general fund and debt.
I am all for Social Security.
The way it has been abused financially indicates the retirement/insurance fund was not treated as such. If it was then the government wouldn't have to start all over to tap the "reserves."
Don Levit

[Libertarian jerry]

More wishful thinking. Yes,the Social Security checks will go out to all recipients in the foreseeable future. The only problem is that when you go and cash the check the money you get won't even buy a cup of coffee.

[Don Levit]

Jerry:
You obviously are well aware of the legalities surrounding Social Security. This idea that the program is fundedd by a tax, just like welfare programs are funded by taxes, may have direct relation to the using of surplus FICA taxes and "interest" for current government expenses.
I mean, if the contributions for Social Security are legally, taxes for the general welfare, why not use the contributions in that manner?
Of course, this is not what people would expect of the "reserves" for an insurance/retirement system.
Don Levit

[Doable Finance]

I don't see a whole lot of difference between American people finances and those of the government. Western societies in general and American in particular, whether families or government, have always wanted and embraced living on other people's money.

We have never even tried to live within our means and folks who have tried and been successful can sleep better and can better enjoy their financial life.

We have a demon sitting in our mind. In most cases, the demon belongs to the spending side instead of trying to save.

Americans have been facing hard times to get out of debt not only on individual level but the government level as well, perhaps more.

[Union-Busting Drive]

Wisconsin GOP Governor in Neofascist Union-Busting Drive; Mass Strike Dynamic Returns to US After Four Decades of Labor Rout; Koch Strikebreakers of "Tea Party: Can Be Defeated By Wall Street Sales Tax Plus Expanding Strike Front; Turn Any GOP Government Shutdown or Default Into A Nationwide General Strike
[Translate]

Webster G. Tarpley, Ph.D.
TARPLEY.net
February 20, 2011

Washington DC, Feb. 20, 2011 – After four decades of disillusionment, and demoralization, disorientation and rout of the labor movement, the mass strike is once again abroad in the land. In dozens of state capitals, reactionary Republican governors and runaway legislatures, trading on the primitive slogans of the astroturf “Tea Party” movement, and controlled by sinister billionaires like the Koch brothers, are attempting to implement their lunatic agenda of tax cuts and deregulation for the super-rich, while attempting to shift the costs for Wall Street’s world economic depression onto the backs of working people. The reactionary attack is now so ferocious that it is goading increasing numbers of American working people into actions of self-defense, leading US workers to put aside the apathy and passivity which have prevailed in the labor movement since the Nixon administration.

In a move of unusual barbarism and savagery, Republican Governor Walker of Wisconsin is attempting to loot the wages and pensions of state workers, while at the same time stripping them of the right to collective bargaining which they have exercised for many decades. The workers, students, and citizens of Wisconsin and surrounding states have responded to Walker’s challenge by occupying the state capital and maintaining a continuous presence in downtown Madison. The situation, bearing certain formal similarities to Tahrir Square in Cairo, is now a focus of national and international attention.

http://tinyurl.com/48dbzkq

[Libertarian jerry]

To;Union Busting Drive.......I thought the Soviet Union collapsed in 1991. Apparently its alive and well in the Union Halls of Wisconsin. The people in Tahrir Square in Cairo wanted to get the government off of their backs. The people occupying the state capitol in Madison apparently want the government on the backs of the Wisconsin Tax Payers who in a free and fair election voted for a governor and legislature to clean up the fiscal mess brought on by the corrupt and collectivist government employee unions. About the only people being looted are the productive people of Wisconsin who are employed in the American Free Enterprise system who create the wealth that allows the Wisconsin Political Class to enjoy their overpaid and under worked "jobs." No wonder that the overtaxed and exploited Economic Class is fleeing Wisconsin in droves. Fidel Castro would be proud of you.

[Union-Busting Drive]

@ jerry built...

from what I read they want to hold on to their collective bargaining and are willing to reduce salaries etc.

If the governor was serious he'd do a top down audit of each state legislator, each city, each town...everyone in government that has a business tie...remove all conflicts....claw back all crony dealing excess profits...nullify any consulting contracts to friends and family...cut any one with 2 or 3 government pensions, etc, etc...then cut the working class

BUT HE WON'T

THIS IS A PUSH TO DESTROY...AND IF SUCCESSFUL WILL ROLL....benito mussollini would be proud to call you friend

Fascism, , is a radical and authoritarian nationalist political ideology. Fascists seek to organize a nation on corporatist perspectives; values; and systems such as the political system and the economy. ...

[Union-Busting Drive]

@jerry..I'm sure he brought a lot to the table...or is that under the table....yes lets carve up the little people...so there's more for them...

Daley, Chief Of Staff, Earned $8.7 Million From JPMorgan Last Year

William Daley, formerly JPMorgan Chase's Midwest chairman and head of corporate responsibility, made $8.7 million in 2010 and the first week of 2011 at his former employer, according to disclosure forms, Bloomberg reports. That total represented a combination of his salary and two bonuses paid in cash and stock. A typical American worker makes between $36,000 (for women) and $47,000 (for men), according to the Census Bureau.

Daley was chosen in part because of his private sector experience, and his selection was seen as a move by the president to repair what some perceive as a strained relationship with big business. But while business leaders have approved of the selection, critics say Washington already enjoys too close of a relationship with the financial sector.

http://www.huffingtonpost.com/2011/02/21/william-daley-pay_n_825899.html

[Union-Busting Drive]

The Less Discussed Part of Walker’s Wisconsin Plan: No-Bid Energy Assets Firesales.

In case it isn’t clear where the naked cronyism comes in, remember which large, politically active private interest loves buying up power plants and already has considerable interests in Wisconsin. Then consider their demonstrated eagerness to help Mr. Walker get elected and bus in carpetbaggers to have a sad little pro-Mubarak style “rally” in his honor. There are dots to be connected here, but doing so might not be in the public interest.

http://www.ritholtz.com/blog/2011/02/the-less-discussed-part-of-walker%E2%80%99s-wisconsin-plan-no-bid-energy-assets-firesales/

[Libertarian jerry]

Union-Busting Drive......I guess you can't read. I am a Libertarian not a fascist. What you are practicing in your blogs is called Cultural Marxism. That is, instead of arguing point by point in a rational way,all you do is call people names,throw mud,change the subject and talk gibberish. Sol Alinsky would be proud. Hey,I'm tired of supporting people,who because they belong to a government monopoly union and can't compete in the American Free Enterprise system think their entitled to lifetime employment,cost of living adjustments,early retirement and subsidized health care for life. Your under worked and overpaid. Your living off of productive taxpayers who have NO choice. Your putting in a nickle and taking out a dollar. You don't produce enough to be paid what you think your worth. Get a life.

[Union-Busting Drive]

Nice try jerry

reread posts...I just employed your technique...not one answer by you...just what you want, il duce...

I'm not a union member....just have my eyes wide open to the blitz....

Saul wasn't a bad guy...just wanted wrongs to be righted.....tired of supporting?...what?... a civilized society?...so move ...try libya...we'll see how long you last!

[Libertarian jerry]

Union-Busting troll,I mean drive. Taxes are what we pay for a civilized society,said justice Oliver Wendell Holmes. The power to tax is the power to destroy,said justice John Marshall. Again, all you know is Cultural Marxist gibberish.

[Union-Busting Drive]

@jerry....Here's where your taxes went..claw it back if you can..stop blaming the working class!

Can your justices enforce the laws you so aptly quote or are they in the pockets of the ruling class?

Why Isn't Wall Street in Jail?
By Matt Taibbi

...Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world's wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people...

http://www.rollingstone.com/politics/news/why-isnt-wall-street-in-jail-20110216?page=1

[Libertarian jerry]

UBD, your a troll

[Union-Busting Drive]

@ jerry..it's you're and no troll...just not a fool...it's as clear as a bell what is going on...I guess it's hard when people don't accept the party line...sorry il duce!