Tag: Domenici-Rivlin

Obama-A Socialist America?

G’Day!

I agree with Dr. Charles Krauthammer, who indicated on National TV after this week’s State of the Union address, that President Obama’s intention is to transform America into a European-style Socialist State. Many of my articles over the last two years have suggested that Obama is a “Neo-socialist” – a person who believes in government control over all aspects of the economy, including wealth redistribution, regulations, “Executive Orders,” and central planning. (Neo-socialism is different from traditional ‘Socialism,” which is based on government “Ownership” of businesses and industries.) Neo-socialists want political and economic central control over the country but not the responsibility of ownership or consequences. Unfortunately, both socialism and neo-socialism are equally destructive to economic growth and individual liberties and has historically failed or is failing in nations that have pursued it. Is this the future you want for America?

Based on the President’s “Inaugural Speech” and the “State of the Union Address”, it appears evident that Obama and the Democrats have no real intention of reducing government spending, reforming entitlements, or even seriously addressing our federal deficit and debt crises. However, they are intent on more spending, more taxes, more regulations, more debt, and less freedom for the American people. Resuming the pattern of his first term, Obama also seems to be more interested in fixing “Blame” on everyone but himself (especially Republicans) for everything wrong, when he should be exercising bipartisan leadership to resolve our problems – especially the ones he has created or aggravated. In my opinion Obama’s idea of a “Grand Bargain” is to raise taxes by every means possible, including class warfare, to fund “Bigger Government,” “Entitlements,” “Green Energy,” “Climate Control,” “Wealth Redistribution” and any other project his neo-socialist ideology deems desirable. I believe America’s best days could be ahead but “Obammunism” is not the way to solve problems and is not good for jobs, the economy, the Middle Class, or the future of our great country. We need a President who is willing to represent ALL the people fairly, exercise impartial leadership, and take responsibility for the consequences of his actions and policies.

So how has Obama really performed so far? During his first Presidential Campaign, he promised “Change” to transform our government. Unfortunately, he has been remarkably successful in moving America in the direction of European-style socialism and a culture of dependency. In only four years the size of government has increased from 20% of GDP to 25% of GDP. Our annual Federal Spending has increased from $2.9 trillion to $3.8 trillion (an increase of over 30%) and is expected to continue for Obama’s second term. Our annual Federal Deficit has increased from $0.5 trillion to over $1 trillion (an increase of 50%). Our National Debt has increased from $10 trillion to over $16 trillion (a 60% increase and now more than 100% of GDP). In the first two years Democrats passed massive new legislation for government-controlled healthcare, sweeping regulations over the financial industry, and the use of “Executive Orders” by the EPA, the Department of Energy, and the unconstitutional appointments to the NLRB to regulate personal and business use of private property and erode personal freedoms. The Democrat controlled Senate has not passed a budget in nearly four years. Welfare dependency has increased significantly and forced wealth redistribution through higher taxes on the “Rich” was recently enacted (and Obama wants more). The economic results have been the worst recovery in decades and a decline in GDP in the 4th Quarter of 2012. Clearly, Obama has delivered on his promise to “Change” our country. Are these the “Changes” for which you voted? Do you believe continuing these policies will solve our problems and advance the future for our children?

In my opinion it is not too late to correct this adverse trend toward national decline and save our nation. America can resolve its fiscal and debt crisis and restore our country to a solid foundation of responsible government and future prosperity. However, this can only occur if we return to the principles that have made America the greatest and most exceptional country in the world. These principles are: Constitutionally protected individual liberties, free markets, sound fiscal and monetary policies, economic growth, and Constitutionally limited government. The “Obammunists” are rapidly leading us away from our founding principles and toward a future of economic stagnation, shared poverty, limited personal freedom, and dependence on government for much of our survival. Under Obama, America is quickly declining into a centrally controlled overregulated neo-socialist state with increasingly limited opportunities for aspiring individuals and companies to succeed.

So what should we do? We have a republic with democratically elected representatives. It is up to us to determine and vote for the representatives that place the future of America before politics and who will stand up for the best interests of the people and the nation. The first and most vital action we can take is to become informed about the issues and vote out the “Obammunists” in the 2014 election. This one single accomplishment will at least stop the decay and give us the opportunity to correct the damage being done by Obama and the Democrats. Currently, we should demand our President and Congress concentrate on resolving our fiscal/debt crisis, get our economy back on track, and create productive private sector jobs. As I outlined in many of my 45 previous articles, this can be done and we need to do it. The American People should not be the servants of the government. Government should be the servant of the people.

The Old Guy PhD

It’s the Entitlements, Stupid!

G’Day!

With apologies to President Clinton for modifying his famous phrase, this time “It’s the Entitlements, Stupid!” Virtually everyone with a functioning brain knows that our exploding National Debt and $1 trillion annual Federal Deficits are unsustainable. Without a solution to this government-imposed national crisis, the American economy will continue to stagnate, unemployment will be high, job opportunities low, and the country may ultimately decline into bankruptcy. Also, anyone with a functioning brain knows that the solution to this problem must involve compromise and agreement among the three (3) fundamental contributors to the problem; “Entitlements,” “Discretionary Spending,” and “Tax Revenues.” By listening to the Media, President Obama, and the Democrats, you would conclude that the sole cause of our country’s fiscal and debt crisis is insufficient “Taxes on Rich.” Nothing could be further from the truth. This is like trying to stand on a 3-legged stool with two of the legs removed.

Let’s analyze President Obama’s only publicly proposed solution, “Tax the Rich.” Our annual federal deficit is currently $1.3 trillion. Obama’s proposal with possible outcomes is presented below:

Obama “Tax the Rich” Proposal

Possible Annual Revenue (billions)

% Deficit Solved
Raise top 2 rates on Incomes above $200-250,000 from 33 to 35% & 36 to 39.6%

$44.2

3.7%
Raise Dividend tax from 15% to Ordinary Income Rate

$20.6

1.7%
Raise Capital Gains tax fro 15% to 20%

$3.6

0.3%
Reinstate the Pease limit on Itemized Deduction

$12.3

1.0%
Reinstate the Personal Exemption Phase-out (PEP)

$4.2

0.4%

Subtotal Tax increase for Upper-income

$84.9

7.1%
Restore Estate & Gift Tax to 2009 levels

$11.9

1.0%

Total Government Tax Revenue

$96.8

8.1%

 

The above result is a static analysis and assumes no income or behavioral change by taxpayers (highly unlikely). In total, Obama’s “Tax the Rich” solution would potentially generate $96.8 billion per year and solve a mere 8.1% of our annual fiscal deficit problem. Since neither Obama nor the Democrat leaders have publicly suggested any change in either “Discretionary Spending” or “Entitlements,” this would leave a continuing federal deficit of approximately $1 trillion per year or 92% of the fiscal problem unresolved. (Interestingly, a $1 trillion annual deficit is the amount in Obama’s currently proposed budget for the next four (4) years.) This is blind insanity and “Ostrich Management.”

“Entitlement” reform for Medicare, Medicaid, and Social Security combined with growth oriented “Tax Reform” and “Discretionary Spending” cuts are the only ways we can avoid the trap that Greece and other European socialist countries have created for themselves. By insisting ONLY on “Taxing the Rich” with no consideration for “Discretionary Spending” cuts or “Entitlement” reform, Obama appears to be more interested in political ideology than in solving our nation’s economic problems. Without correction, we will create a European slow growth dependent society for America and potentially financial collapse. We must demand a better and more comprehensive performance from our government. I believe the Republicans are correct in demanding that any agreement on additional tax revenues must be accompanied by significant cuts in federal spending.

Let’s review some fundamental facts about our unsustainable National Debt and continuing Fiscal Deficits. The table below summarizes the major items in our national economy and Obama’s 2012 enacted budget.

Item

2012 Budget Amount (Billions)
Total Current National Debt

$16,200
Estimated Gross Domestic Product (GDP)

$15,797
Total Federal Government Receipts (Tax, etc.)

$2,469
Total Federal Government Outlays

$3,796
Annual Federal Surplus (Deficit)

($1,327)

Total Mandatory “Entitlement” Outlays

$2,252

Health (Medicaid, etc.)

$361

Medicare

$484

Social Security

$818

Income Security (Food Stamps, Unemployment, Housing, etc.)

$580

Net Interest on Debt

$225

Total “Discretionary” Outlays

$1338

National Defense

$702

Education

$79

 

Federal outlays in 2012 are expected to be $3.8 trillion (24% of GDP) with a $1.3 trillion deficit after government revenues of $2.5 trillion. Mandatory “Entitlements” total $2.3 trillion, (60% of federal outlays and approximately 15% of GDP), AND are growing at an alarming and unsustainable rate. Discretionary federal outlays (including National Defense) are $1.3 trillion. Simple math indicates that to balance the budget without “Entitlement” reform, the entire Federal Government “Discretionary Spending” (including National Defense) must be eliminated or tax revenues increased across-the-board by approximately 50% to eliminate the deficit. Neither of these alternatives individually or in combination is feasible or desirable. Currently the largest federal “Entitlement” outlays are: Health (Medicaid) & Medicare $845 billion, Social Security $818 billion, Income Security $580 billion, and Interest on Debt $225 billion. (Please note that “Interest on Debt” is unusually small based on an artificially low interest rate (approximately 1-1.5%) resulting from global economic problems and monetary support by the FRS. When interest rates return to normal levels the $225 billion could easily double or more in a very short period of time. Remember, interest rates were in the double digits in the late 1970s and early 1980s. Just look at the recent government borrowing rates in the troubled countries in Europe.)

While the mandatory “Entitlement” programs have good intent and are desirable, they are not sustainable and are inconsistent with economic growth policies. “Entitlements” are where the big federal outlays reside and must be part of a major solution to our fiscal and debt crisis. “Entitlement” reform is the most significant fiscal spending problem we face. Fortunately, we have excellent proposals from Conservatives and bipartisan groups available on how to fix “Entitlements” (see Bowles-Simpson, “The Moment of Truth,” Domenici-Rivlin, “Restoring America’s Future,” and The Heritage Foundation, “Saving the American Dream”). It would be helpful if Obama and the Democrats would acknowledge these or offer proposals of their own. It won’t be easy but as I said in the title, “It’s the Entitlements, Stupid!”

Let’s get to work and save our country!

The Old Guy PhD