Eurobonds: The Issue That Could Shatter Europe

Would you pool your debt with a bunch of debt addicts that have no intention of reducing their wild spending habits?  Of course you wouldn’t.  But that is exactly what Germany is being asked to do.  Increasingly, “eurobonds” are being touted as the best long-term solution to the financial crisis in Europe.  These eurobonds would represent jointly issued debt by all 17 members of the eurozone.  This debt would also be guaranteed by all 17 members of the eurozone.  This would allow all countries in the eurozone to enjoy the same credit rating that Germany does, and borrowing costs for nations such as Greece, Portugal, Italy and Spain would plummet.  But borrowing costs for Germany would rise substantially.  In fact, it is being estimated that Germany could be facing an extra 50 billion euros a year in interest expenses.  So over ten years that would come to about 500 billion euros.  Needless to say, Germany is not thrilled about this idea.  But new French President Francois Hollande is pushing eurobonds very hard, and he has the support of the OECD, the IMF and many top Italian politicians.  In the end, this could be the key to the future of the eurozone.  If the Germans give in and decide that they are willing to deeply subsidize their profligate neighbors indefinitely, then the euro could potentially be saved.  If not, then this issue could end up shattering Europe.

It is easy to try to portray the Germans as the “bad guys” in all this, but try to step into their shoes for a minute.

If you had some relatives that were spending wildly and that had already run up $100,000 in credit card debt, would you be a co-signer on their next credit card application?

Of course not.

The recent elections in France and Greece made it abundantly clear that the populations of those two countries are rejecting austerity.

Instead, they want a return to the debt-fueled prosperity that they have always enjoyed in the past.

Unfortunately, they need German help to be able to do that.

That is why new French President Francois Hollande is pushing so hard for eurobonds.  He wants the rest of the eurozone to be able to “piggyback” on Germany’s sterling credit rating so that everyone can return to the days of wild borrowing and spending.

But Germans greatly fear what a co-mingling of eurozone debt could eventually mean.  Not only would Germany’s borrowing costs rise dramatically, but there is also a concern that the rest of the eurozone could eventually pull Germany down with them.

Austria, Finland and the Netherlands are also against eurobonds, but the key is Germany.

For now, Germany is not budging on the issue of eurobonds at all.  The following is a statement that German Chancellor Angela Merkel made during a recent speech in Berlin….

“It’s just about not spending more than you collect. It’s astonishing that this simple fact leads to such debates”

And she is right.

Why is it so controversial to insist that people not spend more than they bring in?

But this is the problem that is created when you create a false lifestyle fueled by debt that goes on for decades.  People become accustomed to that false standard of living and they throw hissy fits when that false standard of living begins to disappear.

The Germans don’t want to make great sacrifices just so the Greeks, the French and the Italians can go back to borrowing and spending wildly.

Why would the Germans want to do that?

And as a recent CNN article noted, German politicians believe that eurobonds are explicitly banned under existing EU treaties anyway….

“There is no way of introducing them under the current [EU] treaties. Indeed, there is an explicit ban on them,” one senior German official said, adding Berlin would not drop its opposition in the foreseeable future. “That’s a firm conviction which will not change in June.”

But politicians such as Hollande are complaining that austerity could seriously damage living standards throughout Europe.

And Hollande is right about that.

When you inflate your standard of living with borrowed money for many years, eventually there comes a time when you must pay a great price.

Anyone that has ever been in trouble with credit card debt knows how painful that can be.

It is shameful for the rest of Europe to be pleading and begging Germany to help them.

They should take care of themselves.

As I wrote about the other day, Greece would be much better off in the long run if it left the euro and created a new financial system based on sound financial principles.

But in the financial press all over the world there are calls for someone to come up with a “plan” to “rescue” Europe.  For example, the following is from a recent Wall Street Journal article….

There have been two main responses to the crisis: austerity, and kicking cans down roads. Austerity, in case you haven’t noticed, is so last year. It’s out. Which means that unless something else is found, some other comprehensive plan, the other main response, can kicking, is going to run out of road.

Just about everybody backed the idea of eurobonds, except for the Germans, and since they’re the ones with all the money, they’re kind of the only ones whose vote counts anyway. So, it’s time to go to plan B. Only there’s no Plan B, and there’s no time, either.

If Germany does not agree to subsidize the rest of the eurozone, will that ultimately mean that the eurozone will be forced to break up?

Probably.

And that would cause a huge amount of pain in the short-term.

But the euro never was a good idea in the first place.  It was foolish to expect a monetary union to work smoothly in the absence of fiscal and political union.

And to be honest, the entire world would be a better place with less European integration.  The EU has become a horrifying bureaucratic nightmare and it would be wonderful if the entire thing broke up.

But for now, the only thing that is in danger is the euro.

Increasingly, it is looking like Greece may be the first country to exit the euro.

This week, former Greek Prime Minister Lucas Papademos admitted that the Greek government is considering making preparations for Greece to leave the euro.

Not only that, Reuters is reporting that top officials in the eurozone are now working on “contingency plans” for a Greek exit from the euro….

Each euro zone country will have to prepare a contingency plan for the eventuality of Greece leaving the single currency, euro zone sources said on Wednesday.

Officials reached the consensus on Monday afternoon during an hour-long teleconference of the Eurogroup Working Group (EWG).

As well as confirmation from three euro zone officials, Reuters has seen a memo drawn up by one member state detailing some of the elements that euro zone countries should consider.

So obviously a Greek exit from the euro has become a very real possibility.

A recent Bloomberg article detailed how a Greek exit from the euro could play out during the 46 hours that global financial markets are closed over the weekend….

Greece may have only a 46-hour window of opportunity should it need to plot a route out of the euro.

That’s how much time the country’s leaders would probably have to enact any departure from the single currency while global markets are largely closed, from the end of trading in New York on a Friday to Monday’s market opening in Wellington, New Zealand, based on a synthesis of euro-exit scenarios from 21 economists, analysts and academics.

Over the two days, leaders would have to calm civil unrest while managing a potential sovereign default, planning a new currency, recapitalizing the banks, stemming the outflow of capital and seeking a way to pay bills once the bailout lifeline is cut. The risk is that the task would overwhelm any new government in a country that has had to be rescued twice since 2010 because it couldn’t manage its public finances.

Right now, nobody is quite sure what is going to happen next and panic is spreading throughout the European financial system.

At this point, everyone is afraid of what is going to happen if Greece is forced to start issuing drachmas again.  As CNBC is reporting, some big European corporations are already beginning to implement their own “contingency plans”….

Big tourism operators like TUI of Germany and Kuoni of Britain are demanding the addition of so-called drachma clauses to contracts with Greek hoteliers should the euro no longer be in use here. British newspapers are filled with advice columns for travelers worried about the wisdom of planning a vacation in Greece, or even Portugal and Spain, should the euro crisis worsen. Large multinational companies like Vodafone Group, Reckitt Benckiser and Diageo have taken to sweeping cash every day from euro accounts back to Britain to limit their exposure.

Sadly, this is probably only a small taste of the financial anarchy that is coming.

France is likely to keep pushing hard for the creation of eurobonds.

Germany is likely to keep fiercely resisting this.

At some point, a moment of crisis will arrive and a call will have to be made.

Will Germany give in or will political turmoil end up shattering Europe?

It will be interesting to see how all of this plays out.

3.6 Million Taxpayer Dollars Being Used To Support The Lavish Lifestyles Of Former Presidents Such As Bush And Clinton

You are not going to believe how much money is being spent on our former presidents.  At a time when U.S. government spending is wildly out of control, a total of 3.6 million dollars is being used to support the lavish lifestyles of former presidents such as George W. Bush and Bill Clinton in 2012.  For 2013, the plan is to increase that amount to 3.7 million dollars.  But do any of them really need this kind of welfare?  The truth is that all of them are very wealthy.  So what justification is there for giving them so much money?  You can see the GSA budget proposal for former presidents for 2013 right here.  The 3.7 million dollars for 2013 does not even include the cost of Secret Service protection.  Rather, it only covers expenses such as office rentals, travel, phone bills, postage, printing and pension benefits.  Certainly it is not unreasonable to grant former presidents a small pension, but should we be showering them with millions of dollars each year?  At a time when the federal government is drowning in so much debt, the fact that these former presidents are willing to take such huge amounts of taxpayer money really does make them look like parasites.

So why are these former presidents getting this money?

Congress passed The Former Presidents Act of 1958 because they didn’t want other presidents to end up as poor as Harry Truman did.

Well, these days former presidents are definitely not in danger of ending up poor.  But this law does enable former presidents to stick the U.S. taxpayer with some absolutely outrageous bills.

For example, George W. Bush is scheduled to get $1,356,000 from U.S. taxpayers in 2013.

$85,000 of that will be for phone expenses.

He must have a really, really bad calling plan.

Bill Clinton is scheduled to get $1,019,000 from U.S. taxpayers in 2013.

A whopping $442,000 of that will be for office space.

That breaks down to more than $36,000 a month.

I hope that office space is nice.

Perhaps he needs a lot of office space to hide from Hillary.

George H.W. Bush is scheduled to get $879,000 from U.S. taxpayers in 2013.

$63,000 of that total will be going toward “equipment”.

How many iPads does he really need?

Even the old peanut farmer, Jimmy Carter, will be getting $518,000 from U.S. taxpayers in 2013.

But do they even need this money?

Exactly how wealthy are these former presidents?

Well, it turns out that they are very, very wealthy.

Bill Clinton earned an estimated $41 million in speaking fees during the first six years after he left office.  He also received a $12 million advance for for his memoir, “My Life”.

George W. Bush earned an estimated $15 million in speaking fees during just the first two years after he left office.

So why are we spending millions to support these guys?

Perhaps this is yet another question that we don’t have an answer to.  We can add it to the list….

-Why do chimps throw poop?

The federal government has spent $592,527 to try to find the answer.

-Do unhappy people spend more time on Twitter or on Facebook?

The federal government has spent $198,000 in an attempt to get an answer.

-How do rats respond to jazz music when they are high on cocaine?

Your tax dollars are being spent to get to the bottom of it.

-Does cocaine cause Japanese quail to engage in sexually risky behavior?

The federal government has spent $175,587 to find out the truth.

Right now there are more than 100 million working age Americans that do not have jobs, and this is the kind of nonsense that the federal government is spending money on.

Shame on these former presidents for taking this money.

If our Congress critters are looking for a place to cut the federal budget, this would be a good place to start.

Chimps Throwing Poop And 29 Other Mind Blowing Ways That The Government Is Wasting Your Money

Why do chimpanzees throw poop?  The federal government would like to know and is using your tax dollars to investigate the matter.  Every single year, we all send huge amounts of our hard-earned money to the federal government.  We hope that they will spend that money wisely.  Unfortunately, that is simply not the case.  You are about to read some examples of how the government is wasting your money that are absolutely mind blowing.  Anyone that claims that there is not a lot of waste that can be cut out of the federal budget is lying to you.  Our politicians have racked up the biggest pile of debt in the history of the world and they are spending our money on some of the stupidest things imaginable.  It is imperative that the American people be educated about all of this outrageous government waste, because right now the political will to change this corrupt system is simply not there among the current crop of politicians in Washington.  We are stealing trillions of dollars from future generations and many of the things that our politicians are wasting that money on are almost too bizarre to believe.

The following are 30 mind blowing ways that the government is wasting your money….

#1 In 2011, the National Institutes of Health spent $592,527 on a study that sought to figure out once and for all why chimpanzees throw poop.

#2 The National Institutes of Health has spent more than 5 million dollars on a website called Sexpulse that is targeted at “men who use the Internet to seek sex with men”.  According to Fox News, the website “includes pornographic images of homosexual sex as well as naked and scantily clad men” and features “a Space Invaders-style interactive game that uses a penis-shaped blaster to shoot down gay epithets.”

#3 The General Services Administration spent $822,751 on a “training conference” for 300 west coast employees at the M Resort and Casino in Las Vegas.

The following is how the Washington Post described some of the wasteful expenses that happened during this “conference”….

Among the “excessive, wasteful and in some cases impermissable” spending the inspector general documented: $5,600 for three semi-private catered in-room parties and $44 per person daily breakfasts; $75,000 for a “team-building” exercise — the goal was to build a bicycle; $146,000 on catered food and drinks; and $6,325 on commemorative coins in velvet boxes to reward all participants for their work on stimulus projects. The $31,208 “networking” reception featured a $19-per-person artisanal cheese display and $7,000 of sushi. At the conference’s closing-night dinner, employees received “yearbooks” with their pictures, at a cost of $8,130.

You can see some stunning pictures of GSA employees living the high life in Las Vegas right here.

#4 Do you remember a few days ago when credit rating agency Egan Jones downgraded U.S. government debt from AA+ to AA?  Well, someone in the federal government apparently did not like that at all.  According to Zero Hedge, the SEC plans to file charges against Egan Jones for “misstatements” on a regulatory application with the SEC.

Normally, the SEC does not go after anyone.  After all, when is the last time a major banker went to prison?

No, the truth is that the SEC is usually just a huge waste of taxpayer money.  According to ABC News, one investigation found that 17 senior SEC officials had been regularly viewing pornography while at work.  While the American people were paying their salaries, this is what senior SEC officials were busy doing….

One senior attorney at SEC headquarters in Washington spent up to eight hours a day accessing Internet porn, according to the report, which has yet to be released. When he filled all the space on his government computer with pornographic images, he downloaded more to CDs and DVDs that accumulated in boxes in his offices.

An SEC accountant attempted to access porn websites 1,800 times in a two-week period and had 600 pornographic images on her computer hard drive.

Another SEC accountant used his SEC-issued computer to upload his own sexually explicit videos onto porn websites he joined.

And another SEC accountant attempted to access porn sites 16,000 times in a single month.

#5 According to InformationWeek, the federal government is spending “millions of dollars” to train Asian call center workers.

#6 If you can believe it, the federal government has actually spent $750,000 on a new soccer field for detainees held at Guantanamo Bay.

#7 The U.S. Agency for International Development spent 10 million dollars to create a version of “Sesame Street” for Pakistani television.

#8 The Obama administration has plans to spend between 16 and 20 million dollars to help students from Indonesia get master’s degrees.

#9 The National Science Foundation spent $198,000 on a University of California-Riverside study that explored “motivations, expectations and goal pursuit in social media.” One of the questions the study sought an answer to was the following: “Do unhappy people spend more time on Twitter or Facebook?”

#10 The federal government actually has spent $175,587 “to determine if cocaine makes Japanese quail engage in sexually risky behavior”.

#11 In 2011, $147,138 was given to the American Museum of Magic in Marshall, Michigan.  Their best magic trick is making U.S. taxpayer dollars disappear.

#12 The federal government recently spent $74,000 to help Michigan “increase awareness about the role Michigan plays in the production of trees and poinsettias.”

#13 In 2011, the federal government gave $550,000 toward the making of a documentary about how rock and roll contributed to the fall of the Soviet Union.

#14 The National Institutes of Health has contributed $55,382 toward a study of “hookah smoking habits” in the country of Jordan.

#15 The federal government gave $606,000 to researchers at Columbia University to study how heterosexuals use the Internet to find love.

#16 A total of $133,277 was recently given to the International Center for the History of Electronic Games for video game preservation.  The International Center for the History of Electronic Games says that it “collects, studies, and interprets video games, other electronic games, and related materials and the ways in which electronic games are changing how people play, learn, and connect with each other, including across boundaries of culture and geography.”

#17 The federal government has given approximately $3 million to researchers at the University of California at Irvine to fund their research into video games such as World of Warcraft.

#18 In 2011, the National Science Foundation gave one team of researchers $149,990 to create a video game called “RapidGuppy” for cell phones and other mobile devices.

#19 The U.S. Department of Agriculture once handed researchers at the University of New Hampshire $700,000 to study methane gas emissions from dairy cows.

#20 In 2011, $936,818 was spent developing an online soap opera entitled “Diary of a Single Mom”.  The show “chronicles the lives and challenges of three single mothers and their families trying to get ahead despite obstacles that all single mothers face, such as childcare, healthcare, education, and finances.”

#21 The federal government once shelled out $2.6 million to train Chinese prostitutes to drink responsibly.

#22 Last year, the federal government spent $96,000 to buy iPads for kindergarten students in Maine.

#23 The U.S. Postal Service once spent $13,500 for a single dinner at Ruth’s Chris Steakhouse.

#24 In 2011, the Air Force Academy completed work on an outdoor worship area for pagans and Wiccans.  The worship area consists of “a small Stonehenge-like circle of boulders with [a] propane fire pit” and it cost $51,474 to build.  The worship area is “for the handful of current or future cadets whose religions fall under the broad category of ‘Earth-based’, which includes Wiccans, druids and pagans.”  At this point, that only includes 3 current students at the Air Force Academy.

#25 The National Institutes of Health once gave researchers $400,000 to study why gay men in Argentina engage in risky sexual behavior when they are drunk.

#26 The National Institutes of Health once gave researchers $442,340 to study the behavior of male prostitutes in Vietnam.

#27 The National Institutes of Health once spent $800,000 in “stimulus funds” to study the impact of a “genital-washing program” on men in South Africa.

#28 The National Science Foundation recently spent $200,000 on a study that examined how voters react when politicians change their stances on climate change.

#29 The federal government recently spent $484,000 to help build a Mellow Mushroom pizzeria in Arlington, Texas.

#30 At this point, China is holding over a trillion dollars of U.S. government debt.  But that didn’t stop the United States from sending 17.8 million dollars in foreign aid to China in 2011.

Do you feel good about paying your federal taxes after reading all of those examples of wasteful government spending?

All over America, middle class families are scratching and clawing in an effort to survive in this economy, and the oppressive levels of taxation imposed on those families certainly does not make things any easier for them.

It is tremendously immoral for the federal government to take money out of the hands of hard working families and spend it on such ridiculous things.

So what do you all think about the list above?

Do you have any things that you would add to that list?

Are you disgusted by how the federal government is mismanaging our money?

Feel free to leave a comment with your opinion below….

There Is Not Going To Be A Solution To Our Economic Problems On The National Level

For those waiting for our economic problems to be solved, you can quit holding your breath.  There is simply not going to be a solution to our economic problems on the national level.  So why is that the case?  Well, it is because the economic policies of both major political parties are very, very similar when you take a close look at them.  Yes, that statement may sound downright bizarre to many Americans, but it is true.  Both major political parties supported the Wall Street bailouts, both of them fully support the job-killing “free trade” globalization agenda, both of them have dramatically increased the national debt when in power, both of them fully support the currency-killing policies of the Federal Reserve, and neither major political party would get rid of the income tax and the IRS.  And that is just for starters.  Yes, there are some minor differences when it comes to taxing and spending between the two parties, but the truth is that they are a lot more similar on economic issues than they are different.  What we desperately need on the national level is a fundamental change in direction when it comes to economic policy, but we simply are not going to get that from either the Democrats or the Republicans.  That means that there is no hope that the economic storm that is coming will be averted.

So why are the Democrats and the Republicans so similar on these issues?  Well, a big reason is because of who they are trying to please.

The reality of the matter is that most politicians do not really care about what you or I have to say.  Instead, what they are really concerned about is getting as much money for their campaigns as possible so that they can keep getting elected.

When you take a close look at the results of federal elections over the past several decades, it quickly becomes apparent that the candidate that raises the most money almost always wins.

So most politicians have learned to please those that fund their campaigns so that the money will keep rolling in.

Yes, there are a few candidates that are willing to rebel against “the system”, but they are few and far between and the major parties tend to marginalize them.

Once again in 2012, political races will overwhelmingly be won by those that raise the most cash.  The following is from Politifact….

In congressional races in 2010, the candidate who spent the most won 85 percent of the House races and 83 percent of the Senate races, according to the Center for Responsive Politics. That’s a large percentage, but it’s lower than what the sign indicated.

Indeed, the percentage for 2010 was lower than it had been in recent election cycles. The center found that in 2008, the biggest spenders won 93 percent of House races and 86 percent of Senate races. In 2006, the top spenders won 94 percent of House races and 73 percent of Senate races. And in 2004, 98 percent of House seats went to candidates who spent the most, as did 88 percent of Senate seats.

Once you understand how Washington works, it becomes easier to understand why our politicians do such stupid things.

For example, big corporations tend to donate large amounts of money to political campaigns and they love the “free trade” globalization agenda.

They love to import massive quantities of super cheap foreign goods so that they can undercut the prices of goods made in the United States.

They love to set up manufacturing facilities on the other side of the globe where it is legal to pay slave labor wages to workers.

The “free trade” agenda is great for the largest corporations, but it is horrible for the average American worker.

According to the Economic Policy Institute, the U.S. economy loses approximately 9,000 jobs for every $1 billion of goods that are imported from overseas.

Trade with other countries can be good as long as it is balanced.  Unfortunately, the U.S. trading relationship with the rest of the world is tremendously imbalanced.

In 2011, the United States bought more than 550 billion dollars more stuff from the rest of the world than they bought from us.

This trade deficit has enormous consequences that most Americans simply do not understand.

Over the past decade, tens of thousands of businesses, millions of jobs and trillions of dollars have left our country.

Our industrial base is being dismantled and we are rapidly becoming poorer as a nation.

According to U.S. Representative Betty Sutton, an average of 23 manufacturing facilities a day closed down in the United States during 2010.

Just think about that.

Every single day we lost 23 more.

Overall, America has lost a total of more than 56,000 manufacturing facilities since 2001.

Why do you think cities like Detroit are dying?

The truth is that we killed them with our idiotic policies.

America has a trade imbalance that is more than 5 times larger than any other nation on earth has.  We are losing wealth, jobs and businesses at a pace that is absolutely astounding.

It is neither “conservative” nor “liberal” to commit national economic suicide.

Our trade imbalance with China is particularly bad.  The U.S. spends about 4 dollars on goods and services from China for every one dollar that China spends on goods and services from the United States.

Does that sound fair to you?

China slaps huge tariffs on many of our products, they deeply subsidize their own national industries, the brazenly steal technology from us, and they manipulate currency rates so that their products end up being significantly cheaper than ours.

Our trade deficit with China in 2011 was nearly 300 billion dollars.  That was the largest trade deficit that one country has had with another country in the history of the world.

Yet both major political parties refuse to do anything about it.

Back in 1985, the U.S. trade deficit with China was only 6 million dollars for the entire year.

In 2011, our trade deficit with China was more than 49,000 times larger.

The consequences of this trade deficit with China are being felt all over the United States every single day.

For example, the United States has lost an average of 50,000 manufacturing jobs per month since China joined the World Trade Organization in 2001.

Do you support losing more than half a million manufacturing jobs a year?

If not, then you should be for “fair trade” instead of “free trade” where other nations can cheat us blind as often as they want.

The Economic Policy Institute says that since 2001 America has lost approximately 2.8 million jobs due to our trade deficit with China alone.

Do you think that the U.S. economy could use an extra 2.8 million jobs right now?

Sadly, if current trends continue things are going to get a lot worse.

According to Professor Alan Blinder of Princeton University, 40 million more U.S. jobs could be sent offshore over the next two decades.

So why won’t our politicians do something?

The United States has run a trade deficit every single year since 1976.

During that time, America has had a total trade imbalance of more than 7.5 trillion dollars with the rest of the world.

That 7.5 trillion dollars could have gone to support U.S. jobs and U.S. businesses.

Taxes could have been paid on that 7.5 trillion dollars.

Instead, it went out of the country and made foreigners wealthier.

So what is Barack Obama doing about all of this?

Well, Obama has been aggressively pushing for even more “free trade” agreements.  The Obama administration has inked deals with Panama, South Korea and Colombia and the Obama administration is making the Trans-Pacific Partnership (“the NAFTA of the Pacific“) a very high priority.

Well, Mitt Romney must be criticizing these moves, right?

No, Romney has actually criticized Obama for not pushing for more “free trade” fast enough.

Mitt Romney wants to make it even easier for jobs to go out of the country and for other countries to drain our wealth.  The following quote comes directly from the Romney campaign website….

Access to foreign markets is crucial to growing our economy. We must reassert American leadership in international negotiations, follow through on commitments we have already made, and push aggressively for advantageous new agreements.

So we are not going to see a change in direction in trade policy no matter who wins the next election.

Well, what about the national debt?

Are there differences between the two parties on this issue?

Sadly, there are only minor differences.

Both major political parties are packed with big spenders that have been spending us into oblivion.

Since Barack Obama entered the White House, the U.S. national debt has increased by $5,027,761,476,484.56.

That comes to $16,043.39 for every man, woman and child living in the United States.

What the Obama administration and the Democrats are doing to future generations is absolutely criminal.

So what about the Republicans?

Well, when the Republicans have had control of the White House they have run up debt “like a drunken sailor” as well.

If the Republican Party wants to have any credibility when it comes to fiscal issues, it needs to publicly admit that George W. Bush was a horrible failure when it came to the federal budget.

George W. Bush was a “big government” politician that dramatically increased the size of the federal government and spent money like it was going out of style.

He was not a conservative when it came to fiscal issues, and that is the truth.

Sadly, neither political party is proposing to balance the federal budget any time soon.  There are a few politicians that have suggested doing this, but they have been marginalized.

So why don’t our politicians support living within our means?

Well, the truth is that if the federal government balanced the budget today, it would result in a catastrophic drop in living standards inside the United States.  We are currently living in an era of debt-fueled “false prosperity”, and if that false prosperity were to disappear there would be riots in the streets of our major cities within months.

It is much easier for our politicians to continue to pile up more debt and to continue to kick the can down the road.

But this party cannot go on too much longer.  Already, the United States has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain.

As you can see from the chart below, we are in a whole lot of trouble….

Our foolishness will catch up to us in a big way eventually.

Another area where the two major political parties agree is that they both fully support the Federal Reserve.

The Federal Reserve is supposed to keep inflation low, but the truth is that the Fed has absolutely killed the value of the U.S. dollar.  Just check out the chart below which was produced by the Fed itself.  It shows how dramatically the purchasing power of the U.S. dollar has declined over the years….

Keep in mind that the chart above is using official government numbers which actually downplay how much the U.S. dollar has been debased.

If inflation was measured the exact same way that it was back in 1980, the annual rate of inflation would be more than 10 percent right now.

By any measure, the Federal Reserve has been a colossal failure for the American people.  Since the Fed was created, our currency has lost more than 95 percent of its value and our national debt has gotten more than 5000 times larger.

The current Federal Reserve Chairman, Ben Bernanke, has a track record of failure that is legendary.  If you doubt this, just read this article, this article and this article.

But Barack Obama just loves Bernanke.  He nominated him for another term as Fed Chairman and he never criticizes anything that he does.

Thanks Obama.

So will things be any different under Mitt Romney?

Of course not.

During one Republican debate, Mitt Romney actually had the gall to try to explain to all of us why “we need to have a Fed“.

Mitt Romney says that he is “not going to take my effort and focus on the Federal Reserve“.

But the Federal Reserve is at the very heart of our economic problems.

Doesn’t Mitt Romney understand that?

The mainstream media is already telling us not to expect any significant changes at the Fed if Romney wins.  A recent Reuters article had the following headline….

Analysis: A Romney win would likely change little at Federal Reserve

Are you starting to understand why I am saying that there is not going to be a solution to our economic problems at the national level?

A great economic cataclysm is coming, and there is very little hope that it can be averted.

So what does that mean?

It means that we all need to start preparing to weather the coming storm on an individual level.

The nation as a whole may not change course, but as individuals and as families we can change course.

All of us can work to reduce our expenses, get out of debt, build up a six month financial cushion, learn to grow a garden and slowly become more independent of the system.

Both political parties are leading us down a road that will only end in economic disaster.

Instead of waiting for a “national solution” that is never going to come, you need to focus on being your own solution.

Time is short, so you better get ready.

The Price Of Gas Is Outrageous – And It Is Going To Go Even Higher

Does it cost you hundreds of dollars just to get to work each month?  If it does, you are certainly not alone.  There are millions of other Americans in the exact same boat.  In recent years, the price of gas in the United States has gotten so outrageous that it has played a major factor in where millions of American families have decided to live and in what kind of vehicles they have decided to purchase.  Many Americans that have very long commutes to work end up spending thousands of dollars on gas a year.  So when the price of gas starts going up to record levels, people like that really start to feel it.  But the price of gas doesn’t just affect those that drive a lot.  The truth is that the price of gas impacts each and every one of us.  Almost everything that we buy has to be transported, and when the price of gasoline goes up the cost of shipping goods also rises.  The U.S. economy has been structured around cheap oil.  It was assumed that we would always be able to transport massive quantities of goods over vast distances very inexpensively.  Once that paradigm totally breaks down, we are going to be in a huge amount of trouble.  For the moment, the big concern is the stress that higher gas prices are going to put on the budgets of ordinary American families.  Unfortunately, almost everyone agrees that in the short-term the price of gas is going to go even higher.

When you are on a really tight budget and you are already spending several hundred dollars on gas each month, you certainly do not want to hear that gas prices are going to increase even more.

A lot of Americans are moving or are getting different vehicles just because of these outrageous gas prices.  The following comes from a recent Mercury News article….

Katherine Zak, of South San Jose, is searching for an apartment near her new job at Facebook in Palo Alto, partly to cut down the cost of driving. Jeff Benson, of Raymond in the Sierra foothills, typically drives 60,000 to 70,000 miles a year and has traded in his 19 mpg Ford Taurus for a Fusion that gets 33 mpg. And David Thomas says his commute from San Jose to San Francisco is getting so expensive that he and his fiancee are hunting for a house near a BART station in the San Mateo-San Bruno area to shorten his commute and lower his $400-a-month gas bill.

The price of gas is going even higher even though energy consumption is sharply declining in the United States.  Just check out the charts in this article by Charles Hugh Smith.  Americans are using less gasoline and less energy and yet the price of gas continues to go up.

That is not a good sign.

Certainly any decrease that we are seeing in the U.S. is being more than offset by rising demand in places such as China and India.  As emerging economies all over the globe continue to develop this is going to continue to put pressure on gas prices.

So just how bad are gas prices in the U.S. right now?

Just consider the following facts….

-The average price of a gallon of gasoline in the United States is now $3.53.

-The average price of a gallon of gasoline is already higher than $3.70 in Connecticut, Washington D.C. and New York.

-In California, the average price of a gallon of gasoline is $3.96 and there are quite a few cities where it is now above 4 dollars.

-In mid-January 2009, the average price of a gallon of gasoline in the United States was just $1.85.

-The average price of a gallon of gasoline in the United States has risen 25 cents since the beginning of 2012.

-Never before in U.S. history has the price of gasoline been this high so early in the year.

-The Oil Price Information Service is projecting that the price of gas could reach an average of $4.25 a gallon by the end of April.

-The price of oil just keeps going up.  The price for West Texas Intermediate is about 19 percent higher than it was one year ago.

-The price of gasoline is also reaching record highs in many areas of Europe as well.  For example, the price of diesel fuel in the UK recently set a brand new record.

-In 2011, U.S. households spent a whopping 8.4% of their incomes on gasoline.  That percentage has approximately doubled over the past ten years.

But the price of gas is not the only thing making driving much more expensive these days.

All over the country, our politicians have been putting up toll booths.  Most of the time these toll booths are going up on roads that have already been paid for.

After paying an outrageous amount for gas and after paying the outrageous tolls on many of these toll roads, many Americans wonder if it is even worth it to get up in the morning and go to work.

Unfortunately, a couple of new bills in Congress right now would reportedly allow even more highways to be made into toll roads.

It is almost as if they want to force us all to stop driving our cars.

America used to be the land of the open road, but that era is rapidly coming to an end.

Another thing that could put upward pressure on the price of gas is the situation in the Middle East.

Iran has already stopped selling oil to companies in the UK and France, and there is the potential that war could erupt in the Middle East at any time.

If war does erupt, or if commercial traffic through the Strait of Hormuz was interrupted for even a brief time, that would send the global price of oil through the roof.

Approximately 20 percent of all oil sold in the world passes through the Strait of Hormuz.  If the flow of oil was halted, that would change the global economy almost overnight.

So is there any good news?

Well, there is one thing that would likely bring down the price of gas substantially.

A global recession.

Remember what happened back in 2008.

Just like we are seeing right now, the price of gas really spiked early in that year.

Eventually, the price of oil hit an all-time record of $147 a barrel in mid-2008.

But then the financial crisis struck and the price of oil fell like a rock as you can see from the chart below….

So could that happen again?

Certainly.

There are a ton of other parallels between 2008 and 2012.

In both years, we saw global shipping start to slow down dramatically.

In both years, the U.S. was getting ready to hold a presidential election.

In both years, many economists were warning that a great financial crisis was about to strike.

Back in 2008, the epicenter of the financial crisis was on Wall Street.

This time, the epicenter of the financial crisis will probably be in Europe.

Keep your eye on Europe.  A disorderly default by Greece (and potentially even an exit from the eurozone) is looking increasingly likely.

But the problems in Europe are not going to end with Greece.  The entire eurozone is going to be greatly shaken by the time this thing is over.

So yes, if we see another major global recession that will be great news for the price of gas, but it will be really bad news for the millions of people that lose their jobs and their homes.

Unfortunately, we live at a time when the world is becoming extremely unstable.  The great era of peace and prosperity that we have been enjoying is coming to an end.  The global financial system is going to experience a tremendous amount of chaos in the years ahead and that is something we will all need to prepare for.

For now, the price of gas is a major concern for millions upon millions of American families.

Someday, however, we will wish desperately that we could go back to these days.

The Man Without A Plan

Barack Obama is a man without a plan.  When you are young, they often tell you to “fake it until you make it”, but Barack Obama is taking this to ridiculous extremes.  Barack Obama has absolutely no idea what he is doing when it comes to the economy, and yet he continues to give speeches in which he declares that he is the man for the job.  The State of the Union speech the other night was just abysmal.  The federal government is spending way too much money, and yet Barack Obama is proposing even more government spending.  Entrepreneurs and small businesses are being taxed into oblivion and yet Barack Obama is proposing even higher taxes.  Our economy is being strangled to death by crippling regulations, and yet Barack Obama is proposing a vast array of new regulations.  Barack Obama always gives a nice speech, but it has become appallingly evident that he is totally out of ideas.  So our country will continue to drift aimlessly along without a direction and without a plan until the next financial tsunami comes along and makes things even worse.

And the American people are starting to clue in to the fact that Obama does not have a plan and does not have anything new to say.  Just check out how the audiences for his State of the Union addresses have declined each year….

2009: 52.3 million

2010: 48 million

2011: 42.8 million

2012: 37.8 million

His ratings are falling almost as fast as the ratings for American Idol are.

It is amazing how Barack Obama can use so many words to say so very little.

He always tickles our ears but then he never delivers the goods.  Toward the beginning of his speech the other night, he made the following statement….

“Tonight, I want to speak about how we move forward, and lay out a blueprint for an economy that’s built to last—an economy built on American manufacturing, American energy, skills for American workers, and a renewal of American values”

Well, that sounds pretty good.  Except for the fact that everything he has done for the past 3 years has been the exact opposite of that.

It is almost as if he woke up that morning and decided that he would try the whole “do the opposite” thing once made famous by George Costanza on Seinfeld.

Obama says that our employment situation is getting better, but that is not really true.  The only way that the federal government can claim that there is an 8.5 percent unemployment rate is because they have decided that millions of Americans that have been unemployed for a long time should not be considered “part of the workforce” any longer.

If the number of Americans that were considered to be part of the workforce was the same today as it was back in 2007, the “official” unemployment rate put out by the U.S. government would be up to approximately 11 percent.

Sadly, the number of Americans that are dependent on the government continues to soar even higher.

Since Barack Obama took office, the number of Americans on food stamps has actually increased by 14 million.

Things have not gotten better for average Americans.

They have gotten worse.

In fact, 10 million more Americans have fallen below the poverty line since 2006.  And in 2010, more Americans fell into poverty than ever before.

A lot of people out there are really hurting, and the American people deserve some real answers.

But instead, Obama was saying stuff like this the other night….

“I intend to fight obstruction with action, and I will oppose any effort to return to the very same policies that brought on this economic crisis in the first place”

Oh really?

What is Obama actually doing about the things that caused the last financial crisis?

The “financial reform” bill was a complete and total joke.  Obama has been shamefully soft on the big Wall Street banks that caused the last crisis.

Today, the “too big to fail” banks are larger than ever.  The total assets of the six largest U.S. banks increased by 39 percent between September 30, 2006 and September 30, 2011.

So now they are more of a danger to the financial system than ever.

And not a single Wall Street executive has gone to jail for what they did during the last financial crisis.

Thanks Obama.

But of course Obama was never going to seriously go after Wall Street.

After all, they are the ones that fund his campaigns.

Most Americans don’t realize this, but 3 of the top 7 donors to Obama’s campaign in 2008 were “too big to fail” banks.

And the Obama administration has been absolutely packed with ex-Wall Street bankers.  Last year, Michael Brenner wrote the following about the composition of the Obama administration….

Wall Street’s takeover of the Obama administration is now complete. The mega-banks and their corporate allies control every economic policy position of consequence. Mr. Obama has moved rapidly since the November debacle to install business people where it counts most. Mr.William Daley from JP Morgan Chase as White House Chief of Staff. Mr. Gene Sperling from the Goldman Sachs payroll to be director of the National Economic Council. Eileen Rominger from Goldman Sachs named director of the SEC’s Investment Management division. Even the National Security Advisor, Thomas Donilon, was executive vice president for law and policy at the disgraced Fannie Mae after serving as a corporate lobbyist with O’Melveny & Roberts. The keystone of the business friendly team was put in place on Friday. General Electric Chairman and CEO Jeffrey Immelt will serve as chair of the president’s Council on Jobs and Competitiveness.

During his State of the Union address, Obama also promised to bring manufacturing jobs back to America….

“Think about the America within our reach: A country that leads the world in educating its people. An America that attracts a new generation of high-tech manufacturing and high-paying jobs”

That sounds great, except for the fact that Obama has been doing everything he can to get more American jobs shipped out of the country.

The Obama administration has been aggressively pushing new “free trade” agreements with Panama, South Korea and Colombia.  The Obama administration has also made the Trans-Pacific Partnership (“the NAFTA of the Pacific“) an extremely high priority.

And of course we have all seen how wonderfully the first NAFTA worked out.

Our “free trade” policies have been an absolute nightmare for the American worker.

During 2010, an average of 23 manufacturing facilities a day shut down in the United States.  Overall, more than 56,000 manufacturing facilities in the United States have shut down since 2001.

We are bleeding jobs at a pace that is hard to believe.

Amazingly, the United States has lost an average of 50,000 manufacturing jobs a month since China joined the World Trade Organization in 2001.

Yet Obama promises more of the same and that is  supposed to help?

During his speech, Obama correctly noted that many foreign manufacturers are heavily subsidized….

“It’s not fair when foreign manufacturers have a leg up on ours, only because they’re heavily subsidized”

So are we going to deeply penalize those that have been cheating?

Are we going to warn them that we will stop trading with them unless they stop?

Of course not.

Obama is going to do next to nothing to stop what China and other predatory nations are doing to us.

Today, the United States spends approximately 4 dollars on goods and services from China for every one dollar that China spends on goods and services from the United States, and the U.S. trade deficit with China in 2010 was 27 times larger than it was back in 1990.

But the Obama administration doesn’t seem to care much about these things.

In fact, just check out what U.S. Trade Representative Ron Kirk told Tim Robertson of the Huffington Post about the Obama administration’s attitude toward keeping manufacturing jobs in America….

Let’s increase our competitiveness… the reality is about half of our imports, our trade deficit is because of how much oil [we import], so you take that out of the equation, you look at what percentage of it are things that frankly, we don’t want to make in America, you know, cheaper products, low-skill jobs that frankly college kids that are graduating from, you know, UC Cal and Hastings [don’t want], but what we do want is to capture those next generation jobs and build on our investments in our young people, our education infrastructure.

Oh, but Obama now says that he is going to toughen up on trade….

“I’m announcing the creation of a Trade Enforcement Unit that will be charged with investigating unfair trading practices in countries like China. There will be more inspections”

Oh boy – “inspections” – yeah, that is really going to have the Chinese shaking in their boots.

Meanwhile, the Chinese just keep hitting us with new tariffs.  According to the New York Times, a Jeep Grand Cherokee that costs $27,490 in the United States will now cost about $85,000 in China thanks to these new tariffs.

So is Obama going to hit China with tough new tariffs in return?

Of course not.

Meanwhile, our economy continues to bleed businesses and jobs.  According to Professor Alan Blinder of Princeton University, 40 million more U.S. jobs could be sent offshore over the next two decades if current trends continue.

But if you listen to Obama, he makes it seem like many of our industries are in better shape than ever….

“We bet on American ingenuity, and tonight the American auto industry is back.”

Yes, the American auto industry is no longer on the brink of bankruptcy, but it is not “back”.  Just consider the following stats….

*In 1970, General Motors had about a 60 percent share of the U.S. automobile market.  Today, that figure is down to about 20 percent.

*Back in 2000, about 17 million new automobiles were sold in the United States.  During 2011, less than 13 million new automobiles were sold in the United States.

*Japan builds more cars than anyone else on the globe.  Japan now manufactures about 5 million more automobiles than the United States does.

*Since Alan Mulally became CEO of Ford, the company has reduced its North American workforce by nearly half.

*In the year 2000, the U.S. auto industry employed more than 1.3 million Americans.  Today, the U.S. auto industry employs about 698,000 people.

Obama bailed out the auto industry, and they responded by sending even more of our jobs overseas.

During his speech, Obama declared that there will be no more bailouts….

“No bailouts, no handouts, and no copouts.”

That is kind of funny because Obama is basically the all-time champion of handing out bailouts.

If Barack Obama and John McCain had not aggressively pushed for the Wall Street bailouts back in 2008, they never would have happened.

And once Obama became president, there was a seemingly endless parade of bailouts and “stimulus packages”.

So what do you honestly think he will do when the next financial crisis happens?  Do you think he would actually be able to resist the temptation for more bailouts?

Obama also says that he wants to spend more money on training for American workers….

“Join me in a national commitment to train two million Americans with skills that will lead directly to a job.”

But the American people already have enough training.  There are tons of college-educated Americans that are among the ranks of the unemployed right now.

What the American people need are jobs.

Unfortunately, jobs are leaving this country at an unprecedented pace.

Back in the year 2000, more than 20 percent of all jobs in America were manufacturing jobs.  Today, about 5 percent of all jobs in America are manufacturing jobs.

Not only that, but our incomes are also going down.  Because U.S. workers now have to compete for jobs with workers that make slave labor wages on the other side of the globe, pay in this country continues to decline.

A recent White House reported entitled “Investing in America: Building an Economy That Lasts” actually bragged that our trade policies have driven wages in America down.  The following chart is from that report….

The Obama administration has been very good for the largest corporations.

For the rest of us, not so much.

But Obama now says that he wants America to be a place that encourages entrepreneurs and small businesses to thrive….

“It means we should support everyone who’s willing to work; and every risk-taker and entrepreneur who aspires to become the next Steve Jobs.”

Unfortunately, the reality is that the federal government is strangling entrepreneurs and small businesses to death with taxes and crippling regulations.

According to the Bureau of Labor Statistics, 16.6 million Americans were self-employed back in December 2006.  Today, that number has shrunk to 14.5 million.

That is not a good trend.

And right now small businesses are extremely hesitant to bring on new workers.

One recent survey found that 77 percent of all U.S. small businesses do not plan to hire any more workers in the coming year.

So obviously what the Obama administration is doing is not working.

During his speech, Obama also spoke of developing our own energy resources….

“A future where we are in control of our own energy, and our security and prosperity aren’t so tied to unstable parts of the world.”

Hopefully most of those watching laughed when they heard this, because this had to have been a joke.

America is absolutely swimming in oil and natural gas, and yet the Obama administration has blocked the development of those resources at every turn.

Instead, Obama has been very busy trying to push green energy companies on us, but they have had a nasty habit of going bankrupt.

During his speech, Obama also spoke of the need for “comprehensive immigration reform”.

But apparently Obama’s idea of “immigration reform” is to grant “backdoor amnesty” to the vast majority of the illegal immigrants in the United States and to continue to leave our borders completely wide open.

The consequences of such a policy are very serious.  As I wrote about the other day, there are now 1.4 million gang members living inside the United States, and that number has risen by an astounding 40 percent since 2009.

The last thing we need is more “immigration reform” from Barack Obama.

Of course the “class warfare” part was the centerpiece of Obama’s speech the other night.

Referring to it as the “defining issue of our time”, Obama said that now is the time to hit the wealthy with higher taxes….

“We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by. Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules.”

This is going to be what Barack Obama is going to base his entire 2012 campaign on.  He is going to try to tap into the economic frustrations of the poor and the middle class and he is going to try to get them to blame the rich and the “party of the rich” (the Republicans).

But taxing the rich is not going to solve our problems.  If Bill Gates donated his entire fortune to the U.S. government, it would only cover the U.S. budget deficit for about 15 days.

The truth is that the ultra-wealthy are always several steps ahead of the U.S. government.  The global elite are hiding 18 trillion dollars in offshore banks, and they are absolute experts at avoiding taxes.

No, the people that always get hit when taxes are raised are small business owners that try to do things “by the book” and middle class families that are barely scraping by.

What we need to do is to get rid of the income tax system entirely.  It is deeply corrupt and it is full of thousands of loopholes.

Trust me, I know.  I used to study this stuff.

But Obama seems to think that taxing the rich is the solution to all of our problems….

“We don’t begrudge financial success in this country. We admire it. When Americans talk about folks like me paying my fair share of taxes, it’s not because they envy the rich. It’s because they understand that when I get tax breaks I don’t need and the country can’t afford, it either adds to the deficit, or somebody else has to make up the difference – like a senior on a fixed income; or a student trying to get through school; or a family trying to make ends meet. That’s not right. Americans know it’s not right. They know that this generation’s success is only possible because past generations felt a responsibility to each other, and to their country’s future, and they know our way of life will only endure if we feel that same sense of shared responsibility. That’s how we’ll reduce our deficit.”

Oh really?

If we just accept Obama’s plan the deficit will be fixed?

That worked out so well during his first term.  During the first three years of the Obama administration, the U.S. government accumulated more debt than it did from the time that George Washington took office to the time that Bill Clinton took office.

The truth is that Obama does not plan to fix anything.  Barack Obama’s proposed 2012 budget projects that the national debt will rise to 26 trillion dollars a decade from now.  And his budget numbers are ridiculously optimistic.

Not that our tax system does not need reform.

If we are going to have an income tax system (which we should not), then it should at least be fair.

There is no way in the world that General Electric and Mitt Romney should pay a lower tax rate than you and I do.

In a previous article, I noted some of the big corporations that have made enormous profits and yet have paid less than zero in taxes in recent years….

What U.S. corporations are able to get away with is absolutely amazing.

The following figures come directly out of a report by Citizens for Tax Justice.  These are combined figures for the tax years 2008, 2009 and 2010.

During those three years, all of the corporations below made a lot of money.  Yet all of them paid net taxes that were below zero for those three years combined.

How is that possible?  Well, it turns out that instead of paying in taxes to the federal government, they were actually getting money back.

So for these corporations, their rate of taxation was actually below zero.

If you have not seen these before, you are going to have a hard time believing some of these statistics…..

*Honeywell*

Profits: $4.9 billion

Taxes: -$34 million

*Fed Ex*

Profits: $3 billion

Taxes: -$23 million

*Wells Fargo*

Profits: $49.37 billion

Taxes: -$681 million

*Boeing*

Profits: $9.7 billion

Taxes: -$178 million

*Verizon*

Profits: $32.5 billion

Taxes: -$951 million

*Dupont*

Profits: $2.1 billion

Taxes -$72 million

*American Electric Power*

Profits: $5.89 billion

Taxes -$545 million

*General Electric*

Profits: $7.7 billion

Taxes: -$4.7 billion

Are you starting to get the picture?

Hopefully we can all agree that there is something seriously wrong with those numbers.

But fixing holes in the tax system is one thing – blaming America’s economic ills on the wealthy is another.

During his speech, Obama made the following statement….

“You can call this class warfare all you want”

And yes, we will hear the term “class warfare” over and over again for the rest of 2012.

Obama actually believes that “blaming the 1%” can get him sent back to the White House again.

But that isn’t going to solve any of our problems.

Instead, we should be focusing on the root causes of our economic problems.

I would love to see a president get up during a State of the Union address and declare that we need to shut down the Federal Reserve.

Since the Federal Reserve was created in 1913, the U.S. dollar has lost over 95 percent of its purchasing power.

Since the Federal Reserve was created in 1913, the U.S. national debt has gotten more than 5000 times larger.

Thanks to the debt-based Federal Reserve system, we are going into debt at a pace that is unlike anything the world has ever seen.

Right now, the federal government is stealing 150 million dollars an hour from our children and our grandchildren.

But Barack Obama loves the Federal Reserve.

In fact, he actually nominated Ben Bernanke for a second term as Federal Reserve Chairman even though Bernanke has a track record of incompetence that is legendary.

So no, nobody should be applauding Barack Obama for his absolutely abysmal speech the other night.

He is a man without a plan and he has been an absolute disaster for America.

The Debt Ceiling Deal From Hell

Is the debt ceiling deal supposed to be some sort of a cruel joke?  Is this what the American people have been waiting months and months for?  The “debt ceiling deal from hell” is a complete and total fraud.  Barack Obama will not need to worry about the debt ceiling again until after the 2012 election, and no “real” spending cuts will happen until after the 2012 election.  The way the political game in Washington D.C. is played today, if you don’t get something right now, you probably will never end up getting it.  The Republicans have traded a massive debt ceiling increase right now for the possibility of very skimpy budget cuts in the future.  Meanwhile, this deal establishes a new “Super Congress” that threatens to fundamentally alter our political system (and not in a good way).  The funny thing is that everyone is running around proclaiming that the Tea Party won this battle.  That is a complete and total lie.

So what about the $917 billion in “immediate” spending cuts that the Republicans are getting as part of this deal?

Well, they aren’t really spending cuts at all.  Rather, they are spending caps.  Basically what is happening is that future spending increases are being cancelled and our politicians are selling that to us as “spending cuts”.

What is even sadder is that the $917 billion is spread over ten years and the vast majority of the “cuts” are in the latter years.

For example, even if you consider these to be “spending cuts” (which they are not), the deal calls for only about $25 billion in “cuts” in 2012 and only about $47 billion in “cuts” in 2013.

25 billion dollars is far less than one percent of the federal budget, so needless to say these “cuts” are not very impressive at all.

Okay, so how about the second stage of the deal which will produce “spending cuts” of between 1.2 and 1.5 trillion dollars?

Well, yes, these would actually be spending cuts and they would be spread over 10 years.

Near the end of the year, the new “Super Congress” (more on that in a minute) will submit a proposal to Congress which could cut spending over the next 10 years by a total of up to 1.5 trillion dollars.

If the recommendations of the “Super Congress” are not implemented, then “automatic” spending cuts of $1.2 trillion will go into effect over the next 10 years.

However, there are some very important things to remember about these “spending cuts”.

First of all, none of these “automatic” spending cuts would even go into effect until 2013.  The face of American politics will be dramatically different by then, and there is absolutely nothing that makes these cuts binding on Congress.

As Gregg Easterbrook recently noted, Congress can cancel spending cuts at any time and for any reason….

By projecting the only tangible savings — which aren’t even specified, but are merely caps — into the future, the plan allows Congress to cancel them. In 2012 or any future year, Congress will say, “We can’t have caps this year because of the [INSERT ANY WORD CHOSEN AT RANDOM] crisis. We are postponing action till next year.” Rinse and repeat.

As I have written about so many times before, the U.S. national debt is completely and totally out of control.  This was supposed to be the moment when at least some members of Congress were finally going to get serious about our exploding debt.  Unfortunately, our politicians have sold us down the river once again.

Even if the best case scenario happens (which it never does) and Congress sticks to this deal for the full ten years (which is about as likely as hell freezing over), the “savings” that this deal would produce are quite pathetic as Peter Schiff recently explained….

The Congressional Budget Office currently projects that $9.5 trillion in new debt will have to be issued over the next 10 years. Even if all of the reductions proposed in the deal were to come to pass, which is highly unlikely, that would still leave $7.1 trillion in new debt accumulation by 2021. Our problems have not been solved by a long shot.

Keep in mind that Congress can change this deal whenever it wants.

So nobody should get excited about these “spending cuts”.  After all, when was the last time that “future spending cuts” actually materialized in Washington?

The reality is that neither political party seems to want to do much to cut government spending.

So the band will play on and the can will get kicked even farther down the road.

When Obama was inaugurated, the U.S. national debt was $10,626,877,048,913.08.

Today, it is $14,342,358,440,969.10.

But what this “debt ceiling deal” will do is it will give the congressional leadership of both parties much more power.

The new “Super Congress” that this deal establishes will be granted “extraordinary new powers” that regular members of Congress do not possess.

For example, The Huffington Post says that any new legislation produced by the “Super Congress” will not be able to be filibustered or amended….

Under the reported framework, legislation the new congressional committee writes would be fast-tracked through Congress and could not be filibustered or amended.

So who will be a part of the “Super Congress”?

The members will be chosen by the leadership of both parties.

So anyone that is not part of the “establishment” is not likely to be included.

The following is what U.S. Representative Ron Paul had to say about this new “Super Congress”….

“Nothing more than a way to disenfranchise the majority of Congress by denying them the chance for meaningful participation in the crucial areas of entitlement and tax reform. It cedes power to draft legislation to a special commission, hand-picked by the House and Senate leadership.”

It is this new “Super Congress” that will decide what will be in the package of “spending cuts” that will be voted on by the end of the year.

Regular members of Congress will be frozen out of the process.

On December 23rd, Congress will be required to vote up or down on the spending cuts proposed by the “Super Congress”.  Regular members of Congress will not be allowed to amend the legislation in any way, and no filibusters will be permitted.

Does that sound very “American” to you?

The more that one examines this “debt ceiling deal”, the worse it looks.

Meanwhile, many Democrats are running around and acting as if their lunch money was just stolen.

For example, the following is what Politico is reporting that U.S. Representative Mike Doyle said about this deal….

“We have negotiated with terrorists,” an angry Doyle said, according to sources in the room. “This small group of terrorists have made it impossible to spend any money.”

Democratic congressman Emanuel Cleaver was even more dramatic when he proclaimed that this deal “looks like a Satan sandwich“.

Well, this deal is a total nightmare, but not for the reasons that Cleaver is suggesting.

This deal opens the door for more rampant deficit spending, and nearly all of the “spending cuts” are put off until after the 2012 election.

Basically, the Republicans got taken out behind the woodshed and beaten to a pulp on this one.  Any Republican that is trying to proclaim that the debt ceiling deal is a “great victory” is a complete moron.

But in the end, it really does not matter which political party gets a “victory” out of all this.  What matters is that our federal government is still steamrolling toward a date with financial oblivion.

If this is the best that our politicians can come up with, we are absolutely doomed.

 

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